The Budget
The Committee consisted of the following Members:
Chairs: Mr Dai Havard , †Dr William McCrea
† Bebb, Guto (Aberconwy) (Con)
Brennan, Kevin (Cardiff West) (Lab)
Buckland, Mr Robert (South Swindon) (Con)
† Cairns, Alun (Vale of Glamorgan) (Con)
Clwyd, Ann (Cynon Valley) (Lab)
† Crabb, Stephen (Parliamentary Under-Secretary of State for Wales)
David, Wayne (Caerphilly) (Lab)
† Davies, David T. C. (Monmouth) (Con)
† Davies, Geraint (Swansea West) (Lab/Co-op)
† Davies, Glyn (Montgomeryshire) (Con)
† Doughty, Stephen (Cardiff South and Penarth) (Lab/Co-op)
† 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)
Hanson, Mr David (Delyn) (Lab)
Hart, Simon (Carmarthen West and South Pembrokeshire) (Con)
Irranca-Davies, Huw (Ogmore) (Lab)
James, Mrs Siân C. (Swansea East) (Lab)
† Jones, Mr David (Secretary of State for Wales)
† Jones, Susan Elan (Clwyd South) (Lab)
† Kawczynski, Daniel (Shrewsbury and Atcham) (Con)
† Llwyd, Mr Elfyn (Dwyfor Meirionnydd) (PC)
Moon, Mrs Madeleine (Bridgend) (Lab)
† Morden, Jessica (Newport East) (Lab)
† Morris, David (Morecambe and Lunesdale) (Con)
Mosley, Stephen (City of Chester) (Con)
Newmark, Mr Brooks (Braintree) (Con)
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)
Fergus Reid, Margaret McKinnon, Sarah Heath, Committee Clerks
† attended the Committee
Welsh Grand Committee
Wednesday 7 May 2014
(Afternoon)
[Dr William McCrea in the Chair]
The Budget
2 pm
That the Committee has considered the matter of the Budget as it relates to Wales.
The Chair: I apologise: I do not have a Welsh accent. Hon. Members will have to make do with a good Ulster accent this afternoon. However, I do have the pleasure of calling Geraint Davies to open the debate.
2.1 pm
Geraint Davies (Swansea West) (Lab/Co-op): Dr McCrea, it is a great honour and privilege to serve under your chairpersonship. You certainly missed a lot of fire this morning, with various suggestions that Conservative Members had perhaps suggested that the 80,000 people who have had to resort to food banks are in some sense the undeserving poor. However, I will not dwell on those points. I want to talk, of course, about the wizard of Osborne’s Wonga economics.
The Parliamentary Under-Secretary of State for Wales (Stephen Crabb): Will the hon. Gentleman give way?
Geraint Davies: I hope that the Minister will talk about Wonga now, because I know that his party accepts £800,000 from it.
Stephen Crabb: The hon. Gentleman has kicked off this afternoon’s proceedings by repeating a slur made by the hon. Member for Pontypridd this morning. At no point during today’s proceedings has any Conservative Member spoken of people using food banks as the undeserving poor. That is pure invention on the part of the hon. Member for Swansea West. He should withdraw that comment.
Geraint Davies: I was just referring to the former debate, in which the comments that I quoted were made from the Front Bench. What people said was recorded in Hansard and elsewhere.
Owen Smith (Pontypridd) (Lab): I am grateful for this opportunity to put on the record the fine detail of the quote that I referred to earlier. It was from the hon. Member for Aberconwy in a letter to a constituent. That was quoted in The Guardian on 18 December. It reads:
“I have…met with some food bank recipients and the reasons for their use of food banks are varied…a significant number are facing real problems but there are some who appear to use food banks whilst being able to smoke and pay for a Sky TV package.”
I will let hon. Members decide for themselves what was meant to be implied by those remarks.
Guto Bebb (Aberconwy) (Con) rose—
Geraint Davies: I am responding to that point, but I will give way.
Guto Bebb: I would be grateful if the hon. Member for Pontypridd could highlight anything in that response, which I wrote to a constituent, that is in any way inappropriate, because many constituents in Aberconwy would find it very odd that help with the bedroom tax, for example, or food banks are being used by people who can afford a Sky television package—something that I, as a Member of Parliament, cannot afford.
Geraint Davies: That says it all. The situation in Wales is that some 80,000 people rely on food banks. It is a great smear on our civilisation that we find ourselves in that situation. The question is why we are in that situation.
Alun Cairns (Vale of Glamorgan) (Con): Will the hon. Gentleman give way?
Geraint Davies: I will in a moment. I know that the hon. Gentleman wants to go on about Sky television, but I ask him to hold on for a moment. The situation is that half a million people in Britain are on zero-hours contracts, and one of the things that that means is that they move in and out of the benefits system. That may be one reason why in Swansea 65% of people on jobseeker’s allowance have been sanctioned.
You probably know, Dr McCrea, that if you were on jobseeker’s allowance—I am sure that you would not be—you would be getting just £71.80 a week, which is about £10 a day. Let us say that you were on a zero-hours contract, you did not get any work and you had to go back and forth on benefits or that, under the Work programme, as is often the case, you were invited to an interview or an event, the invitation arrived the day after that event occurred and then you were sanctioned. You simply would not have any money. You can go to the food bank, Dr McCrea, up to three times only. That is the number of times that you can use it, so people are moving from a position of poverty to despair to desperation, and it is those people we are talking about. There is no doubt that there are people out there with Sky television, but caricaturing them or even mentioning Sky television amounts to this massive group of people who have been created by the labour market conditions that this Government have imposed—obviously to force people into despair so that they cling to any sort of job, any sort of work—being mocked. To mock them when they are on the floor, as it were, is, I think, despicable.
Guto Bebb: The hon. Gentleman seems to be following the example of the hon. Member for Pontypridd and some Members of the Welsh Assembly, who seem to have decided that debating an issue in Wales is no longer allowed. We are not even supposed to mention any issue which for some bizarre reason seems to be opposed by the Labour party.
Geraint Davies: I am simply saying that it would be quite wrong to caricature this great economic disaster we are seeing at the bottom end of the social scale—
Guto Bebb: Created by your party.
Geraint Davies: Created by your party—or rather the Conservative party. On the point of whose fault is it anyway and that sort of thing—the Laurel and Hardy narrative—here are a couple of lines of history. The reality is that between 1997 and 2008, the economy grew by 40%. We had an international financial crisis in 2008. Obama and Brown engaged a fiscal stimulus, which avoided a global depression, so we had a mild recession. By 2010 the economy was growing. What happened then, obviously, was that the Wizard of Osborne came along and he immediately said, “We’ll cut 500,000 public sector jobs.” That is what he pronounced in May. Imagine oneself as a public sector worker saying, “Which jobs, when? I had better save and stop spending.” Consumption went down. Demand went down in the economy. We then have growth flatlining because all the demand was taken out of the economy.
David Morris (Morecambe and Lunesdale) (Con) rose—
Geraint Davies: It is not exactly complex economics, although as you probably appreciate, unlike most people—certainly those opposite—I have an ability for complex economics and I will take the intervention.
The Chair: Order. There are many things that Northern Ireland Members may be accused of, but we cannot be accused of the economic disaster that one feels one way or the other. Hon. Members have been using the word “you”, but the Chair is completely independent. I ask them to address their remarks to each other through the Chair.
David Morris: I will sit down, Dr McCrea. It is not worth making the point.
Geraint Davies: I thought the hon. Gentleman was going to say something about you, Dr McCrea but thought better of it.
By 2010, we were growing and suddenly all the wind was taken out of the sails. The economy has been flatlining since. As a result, debt as a share of GDP has grown from 55% to 75% and it will be 80% by next year. The Government have borrowed more in four years than we did in 14 years. That is not much of a record and it cannot be blamed on Labour.
There are obviously some elements of the recovery that we have seen that are good, although we have been waiting too long. In the main, it has been focused on a housing bubble in London and the south-east. Bank lending is now beyond 2008 levels for mortgages and consumer debt, but to businesses it is 30% down. If the money is being funnelled, allowing people to spend more on the existing housing stock—housing stock is not being increased—then naturally the price goes up. If the money is not being spent on business investment, productivity goes down. That is why productivity in Britain is 5% down, while it is 8% up in the United States, where there was a similar problem, which started with the sub-prime debt. They have sorted it out because they have focused on growth rather than austerity.
Alun Cairns: The hon. Gentleman’s argument lacks all credibility. Just to pick on one element—I could completely destroy all of what he has said so far—and to paraphrase him, the housing bubble is based in London and the south-east and that is why the economy is not growing. Is that why we have one of the fastest-growing economies in the developed world? Every sector of the economy grew last year for the first time in more than a decade. Furthermore, every region and nation across the UK grew and unemployment in Wales has dropped below the national average. Is that based on the housing bubble in London and the south-east?
Geraint Davies: There has been some welcome growth in the last half year or so, after three years of flatlining. We could not keep on bumping along the bottom for ever with ever accumulating debt. It would be the worst economic legacy we have ever seen if that had continued. Obviously we are seeing some brightness, mainly coming out of London, because 80% of the investment for infrastructure is in London and the south-east.
Susan Elan Jones (Clwyd South) (Lab): The hon. Member for Vale of Glamorgan was probably a little too modest. He spoke about jobs and the Welsh economy, but he forgot to congratulate the Welsh Government on Jobs Growth Wales. However, I will be delighted to do that for him.
Geraint Davies: Hold on. Dr McCrea, the hon. Gentleman is out of order. He cannot intervene on someone’s intervention without permission.
Alun Cairns: Will the hon. Gentleman give way?
Geraint Davies: I am sure the hon. Gentleman will give a long-winded speech later. He insinuated that he would, and we all look forward to that with great glee.
It was stated that the Budget would stimulate the drivers of growth. The Chancellor has just woken up to the fact that the way to reduce the deficit is not by cuts alone, but by a balance between growth and cuts. The real political debate should be: what is the right timing and balance between growth and cuts to get down the deficit? To be frank, it has not been properly addressed on either side of the Chamber, but that is the real question, so what does growth look like, and, where we need to make savings, can we make them in a way that does not harm the productive capability of Britain and Wales and is not unfair? I will be coming on to those areas.
The Chancellor talked about drivers, and what he said about exports was quite welcome: let us have some more UK Trade & Investment. We have said we want more engagement with UKTI in Wales, but the hard facts are that we have a massive trade deficit, which has gone up by 15% since 2010, from £100 billion to £115 billion, so that is not working. We have massive growth in developing markets. The strategic question for British industry is: how do we take advantage of that, rather than saying, “We can’t produce as cheaply as them. What are we gonna do? We can’t produce these plastic cups and we’ll have to have lower wages”? In China, for
example, 20% of the population is now “middle class” and looking for designer products and brands, and looking for tourism. There are opportunities for cultural investment.I speak at length, as the Secretary of State knows, about Swansea, culture and Dylan Thomas. Those are important assets to have and to market internationally to attract a growing number of people who simply want to come to Britain or Wales and spend thousands of pounds, but we seem to be completely preoccupied and not considering that very much. On the technological side, there is an opportunity to feed into those growing marketplaces as well, yet in the past four years we have seen a 15% deterioration in our trade deficit.
The Chancellor came up with some housing targets, but those targets are lower than the trend in population growth. I know that Government Members like to say, “In Wales that matter is devolved, so that is their fault,” and that the reason there is a problem with housing benefit is partly because the Welsh Government have not built enough, but the reality is that the Conservatives have cut the capital budget for Wales by some 50%, so we need to do something, and we need to do things in creative ways.
We worry about spending too much, but there are creative ways of building houses. A council with a bit of derelict land can get a private sector developer involved. The council can suggest splitting the equity in half if the developer builds the houses. The council can take the social housing half and the other half can be private sector houses, and the council can take half the income stream or whatever combination. That is done regularly in the United States. Derelict land is an asset with no income. Add the developers and we end up with an asset that generates an income and supplies a social need with no extra cost to the public sector borrowing requirement. The equity in the land and the buildings is shared and owned by both parties. We need creative thinking. This is not only about spending and tax and borrowing.
We also need to think creatively about inward investment from abroad. If a country with an oil or trade surplus wants to invest to generate an income stream, they could buy some tourist infrastructure in Swansea, for instance. If they could get a return from people visiting, that would be a good thing, and we would have an extra attraction in Swansea. Can the Government help to negotiate such inward investment? It does not really cost anything to generate a better return for Britain.
On the other hand, if the Prime Minister goes to China on a trade mission and comes back with a signed deal in his hand for the Chinese to build HS2 and our power stations, is that a good deal? It might be that the headline price is slightly lower, but what does it cost Britain? If we had a German or Chinese procurement supplier, or whatever, the corporation tax would be paid abroad, the income tax and national insurance would largely be paid abroad, and the productive capability—particularly for something technological such as HS2 or nuclear—which we might otherwise export if we acquired that expertise, would not be here in Britain. There needs to be smarter thinking on economic and business management for Britain. There is certainly no such thinking in the Budget.
People know my view on HS2, which is that we should have our fair share. I am a supporter of HS2 in the round, but we are talking about Wales today. The reality is that, as people know and KPMG has shown, in the Swansea bay city region, for example, we would lose £43 million every year because inward investment would be displaced north, as the timings between north and south, and between west and east, would contract. I know the Secretary of State will be jumping up and down on his hind legs saying, “You’ve got electrification after your campaign, so everything is fine.” The extension of electrification from Cardiff to Swansea, which has belatedly been granted, is welcome, but unfortunately it appears that the Prime Minister has turned on his word and broken his promise. When he said, “I will electrify all the way to Swansea,” he meant, “I will electrify all the way from Bridgend to Swansea and from Paddington to Cardiff, but I will miss the bit in the middle because that is for the Welsh Government.” That is not electrification from Paddington to Swansea, is it? We have all these weasel words on that.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC): I agree with the hon. Gentleman’s points about HS2. With that in mind, will he explain why he and his colleagues voted with the Government last week to support HS2 without a guarantee that Wales will get those consequentials?
Geraint Davies: Because in principle we are in favour of HS2 and all the detail has not been worked out. Like the hon. Gentleman, I have been arguing for our fair share—the proportionate fair share would be about £1.9 billion. Welsh MPs on both sides of the House should be arguing for our fair share of infrastructure investment. As I mentioned, 80% of overall investment is in London and the south-east. The idea is that, because people are migrating to London and the south-east, leading to more and more demand, everything has to happen there. In fact, if there was more investment elsewhere—transport investment is £5,000 a head in London, but about £500 a head elsewhere—and that investment was more evenly spread, we could have more city regions and clusters, and all the rest of it. We could then have a more balanced economy. The concession given by HS2 to the northern cities was that, instead of just having a north-south spine, there would be an east-west connection between the northern cities, which would give them great power to build and cluster themselves, rather than their being drained out to the south. We need to talk about connectivity to south Wales, although I appreciate that some connectivity is planned for north Wales via Crewe.
To answer the hon. Gentleman’s question, given that the situation is complex, my response has not been to say, “I am walking out and not voting for this.” In fact, I abstained in that particular vote, because I am not against HS2, but I will not support it without a proper fair share for Wales.
I am not a great road lover, but we do have a growing population, as well as a growing economy—or at least we should—and part of that is based on roads. Across Britain, there was a 49% cut for roads between 2010 and 2012, and clogging up our transport infrastructure will not help us. We will not have HS2 until 2030, and hon. Members will notice that it is being built from the south
to the north, not from the north to the south, so one wonders about the intent behind that, as the impact will certainly be unbalanced economic growth.We want one nation, and another aspect of that is fairness. The bedroom tax disproportionately affects Wales, and of course there is a different argument about it in London, because there is such a shortage of houses, and the way in which people there can be moved around is problematic. It is not right to pull someone out of the family home in which they have lived after their children choose to go to university or move out to work.
Jonathan Evans (Cardiff North) (Con): We have heard a lot about the imposition of what people call the spare room subsidy or the bedroom tax—let us put that difference aside for a moment—but, as far as I understand it, only three local authorities in Wales have accessed the discretionary fund. Can the hon. Gentleman share with us any insight into why that might be, if the bedroom tax is having the shattering impact that he talks of?
Geraint Davies: My understanding is that the authorities have all accessed the discretionary fund, but only three have, like Oliver Twist, asked for more. Authorities had the presumption that they would be approaching a nasty, tight-fisted Tory Administration who would, as in “Oliver Twist”, refuse to give them any more money. It has emerged that some money has been given to people who asked for more, and I imagine that, following that revelation, more will come forward.
The reality remains that the amount in the discretionary fund is small in the context of the real demand. As the hon. Gentleman knows, Wales is the hardest hit of all regions, as some 40,000 people—the proportion is 46%— are hit by a bedroom tax of £798. Those people are on housing benefit and already in poverty. More than half the people in poverty in Wales are in work, and they are having to go to food banks. That is the sort of Dickensian society that we are generating.
Geraint Davies: Over to Dickens.
Jonathan Evans: Let us test this Dickensian proposition. The inadequate amount in the discretionary fund that the hon. Gentleman is talking about is six times larger than the sum that was made available by the previous Labour Government for discretionary spending in the private sector.
Geraint Davies: The size of the sector affected now—the number of people in such housing—is different from the size of the relevant sector at that time. The Government have claimed that this is a matter of good housekeeping and that the reasons for the bedroom tax are under-occupancy and spiralling housing benefit. Under-occupancy is 10% in the social sector, 15% in the private rented sector and 49% in the owner-occupier sector. There is not a big under-occupancy problem, because families in need with children are given houses, the children grow up, the tenants die and the house is passed on.
In the private rented sector, to a large extent, people do not regard the property that they occupy as their family home. The Leader of the Opposition is beginning to tackle that by saying that there should be three-year tenancies so that properties become homes. A one-year
tenancy does not allow someone to make a sustainable home, so people can move around, and if they do not feel that a place is their home, they will, if necessary, save money and move. That is different from being born into a community on an estate. Those estates are basically a symptom of market failure. The post-war Government saw that people were living in squalor and that they needed quality housing to be productive, to make a contribution to the nation and to build a better Britain—that was why we had homes for heroes. Now no such homes are being built. People who live in the few that remain are basically pulled out by their hair and stuck somewhere else as soon as their children have grown up and left. It is quite preposterous.Susan Elan Jones: I remember a few years ago when there was the great debate about broken Britain. To be honest, I think that some in the Labour party were a little too quick to condemn. Some of the writings from the Centre for Social Justice on the matter were quite thought-provoking, and I remember that they talked a great deal about the importance of stability. The three-year tenancy will be an extremely good idea because of its effects on community stability and stability of schooling, so I hope that there will be more common ground on the matter than the current rhetoric suggests.
Geraint Davies: That is a good point, well made. What is more, when we look at the change—this also applies to procurement—we need to ask what will be the economic and social impact in the round. In rural areas of Wales, if people have to move from their home town, they may have to break off with their neighbours and change their children’s schooling, and they may have problems commuting to their jobs. Such things undermine the productivity of the head of the household, as well as the future productivity and stability of the children, and that is not helpful. The cost of housing benefit has doubled to more than £20 billion in the past 10 years, but 70% of the increase is due to private rents. That means that we should build more social housing at lower rents because we will all gain, as we will have better houses and a stable environment, and use the money better.
David Morris: Does the hon. Gentleman agree that this Government have built more social housing than the previous Labour Government?
Geraint Davies: Not as far as I am aware. As I said earlier, the Chancellor’s current forecast is for less than population growth, so we are not in a good place. Strategically, we should invest in housing, and I have painted a picture of how one could build more houses at no extra cost, if there was land in the right place. Of course, there will be problems in providing connectivity to these new areas, which do not always have to be in London, where it is expensive to build, but we need a more strategic approach to what has been called “broken Britain”.
I am worried that about 65% people on jobseeker’s allowance in Swansea have been sanctioned. Everyone has been saying, “Isn’t it great that we have more people in work?”, but that is not proper, sustainable work that lifts productivity. Recently, GDP has increased marginally, but when the first million or so jobs were created, there
was no overall growth in GDP. Strangely, more people were working, but the same output was being achieved. There was just displacement, which comes back to the issue of productivity.Jonathan Evans: May I specifically refer to the evidence from the car manufacturers, which decided not to lay people off during the recession? Keeping people on had an impact on growth, as well as employment numbers. Surely that is an explanation of the figures to which the hon. Gentleman refers.
Geraint Davies: My hon. Friend the Member for Pontypridd mentioned ReAct, and the situation is mixed. The car industry is doing well—the Prime Minister understandably mentions it—but the trade deficit has increased by 15%, and if it were not for the cars, it would be worse. I welcome what we can learn from the car industry, and one of those things is that it is important to sustain skilled workers and invest in their human capital, rather than hiring and firing them at will, as we have heard that McDonalds does, with the naive idea that that will maximise profit. Sound employers should invest in their workers’ productivity, rather than treating them like unskilled people whom they can bring back and forth to the machines.
Let me give an example about the issue of fairness regarding what used to be called incapacity benefit. My hon. Friend the Member for Ogmore said that the Conservatives’ historical way of fiddling the figures was to put people on incapacity benefit, but there has been a change under the new Administration—they have a new wizard wheeze. They say to people who are clearly unfit for work, “Sorry, you must do this Atos test. Can you lift this cardboard box above your head and walk five yards? Yes? You’ve got the job.” Immediately those people’s benefits are cut, and they are continuously asked to attend Work programme appointments, which causes them anxiety. They used to be asked to sign on once every two weeks, but now they can now be asked to sign on every day. A person on £72 a week—£10 a day—who spends £4 every day to get the bus to go to sign on will have 50 quid left, so people are really being squeezed. A man called Mike Rainey came to see in the past couple of weeks. He is 28 years old, but his consultant says he looks like he is 98. He has a heart condition that means that when he has anxiety, it simulates a heart attack. He also has juvenile rheumatic problems, which means that he is in continuous pain, whether he is stood or sat down. When Atos assessed whether he was fit for work, he had 17 tests and he scored zero. On all the tests he was fit for work, so his benefits were cut and he was told, “You have to go to work.” As a result, he tried to do that, but had anxiety problems and then a heart attack. He was rushed to hospital and the surgeon said he had been within seconds of dying when he arrived.
There are lots of other examples of people with chronic conditions who simply cannot work. There is a move basically to cut the numbers—if someone is on sanctions, they are not unemployed—and cut the costs. I would suggest that the quantum of these costs—obviously the approach is wrong intrinsically and should not happen—does not really add up to a hill of beans. It
was said the Work programme would cost £5 billion but, as has been pointed out, it was, certainly initially, no better than doing nothing. Now we have a 15% success rate, whereas the rate for the Welsh version is something like 64%. We need to work together and to deliver evidence-based best practice.David Morris : Does the hon. Gentleman agree that Atos is terrible? I am on record as saying that many times. Does he also agree that whatever Government come in, of any political persuasion—even though Labour signed the original agreement with Atos—things would be more stringent and would help people across this country? This is not a political point to make.
Geraint Davies: I am tempted to say that they would not give a toss, but that might sound rude. I understand that Capita has the contract in Wales. My understanding is that originally Atos was involved in insurance claims, and its great added value was not to give people money that they deserved. That was why the Conservatives picked it, but it has been a bit of a mess.
Jonathan Evans: Just so we get the record straight, the Atos contract was given by the previous Labour Government, not this Government. This Government ended the Atos contract and gave it to Capita.
Geraint Davies: Clearly, Atos was not working in the current regime. It does not work and it needs to change, but it is not about who administers it. I am saying that the 17 tests that my constituent faced are wrong. Clearly, he could not do a job of work.
Moving swiftly on to inward investment. We are talking about the economy and the Budget in Wales: what does Wales need? Obviously, indigenous growth and inward investment and trade. At Prime Minister’s Question Time, the Prime Minister, talking about Pfizer, said of inward investment, “Don’t put that at risk”. I was tempted to jump up and say, “What about this referendum on Europe?” If we are out of Europe, the big boys like Airbus, Tata, Ford and Unilever say they will cut thousands of jobs. They also say that talk of a referendum makes them wonder whether we will be in or out if the Conservatives get in and there is a referendum. The way UKIP is going, if the Conservatives get in and have a referendum, on today’s polls it looks as though possibly the majority of people will vote to get out.
If you, Dr McCrea, were Ford or Tata and had a choice of investing in new capacity in mainland Europe or Wales, which would you choose? Obviously, you would think there was a 50-50 chance we will be out of Europe, given that the Conservatives have pledged to take a risk on a referendum and are keeping their fingers crossed that we will not vote to leave, but that is not the way it is looking. Therefore, we are losing jobs now, through this incompetence and cowardice because of UKIP. At first, the Tories ignored UKIP and called them closet racists, or whatever, then they mimicked them, but they cannot out-UKIP UKIP. They have to do the right thing in government. The right thing is to have a referendum only if there is a proposed treaty change, and there is not.
Geraint Davies: Who wants to intervene?
The Chair: Order. May I urge Members to stick to the Budget—the matter before the Committee this afternoon—rather than the European referendum? Guto Bebb, did you want to make an intervention?
Guto Bebb: I simply wanted to ask the hon. Member for Swansea West when we can expect his stream of consciousness to come to an end.
Geraint Davies: I was waiting for the hon. Gentleman to talk about Sky television and the undeserving poor. We look forward to that with glee. I will not talk about Europe. This Budget is about inward investment and economic growth, and part of that tapestry is our existing big employers in Wales. My point, simply, is that we do not want to put that at risk; we want to encourage future employment. On trade with Europe, the answer is not to go around promising referendums as if there is a big problem and some great new world out there, when there is not.
The carbon tax, which was introduced in a previous Budget and is now being reversed, was mentioned by the hon. Member for Monmouth, who we know is somewhat sceptical about global warming and things of that nature. The reality is that the Chancellor introduced a special carbon tax, carbon pricing, which would have—and did—cost Tata enormous amounts in multimillion pound bills. It made the company uncompetitive and caused it to consider whether to be in Europe or in Wales. It has done a lot of lobbying, as have other big energy consumers, and we have now had this welcome U-turn.
I wonder about the whole debate about carbon and green energy. The reality is that, while we do the right thing, we are increasingly importing millions and millions of widgets from China, or wherever, that have been produced with a lot of carbon emissions that would not have been produced here, had those widgets been made in our country, because we are raising the bar. Should we be considering across Europe some level of carbon pricing on imports? It is no good just exporting emissions. We measure our emissions in consumption in households and in production, but not in consumption of imports that might have been produced by building more coal-fired power stations. It is a big debate, and introducing carbon pricing on imports would cause a problem with the overall free trade argument, which is obviously benign. If free trade is undermined, there can be problems. It is something, however, that we should at least talk about.
Finally, because I know other Members want to speak about Sky television and other issues, I will speak very briefly about pensions. The big flagship policy for the Chancellor was the liberalisation of pensions, to allow people to spend what they like from their pension pots. I do not necessarily disagree with the principle, but if people will be allowed to spend the money on what they like—people have been making jokes about buying Ferraris and so on—would it not have been a good idea to provide a portfolio of tax-efficient products on which that money could be spent? Those products would generate returns, and the money could be invested in sustainable jobs in industry in Wales and across Britain
in a more balanced way. That opportunity was not properly taken, and the policy was not properly thought out. It would be a choice for the pension fund investor.Before he left, the hon. Member for Monmouth said that anyone with a pension was a shareholder and therefore a capitalist. What I would have said to him on pension liberalisation, had he bothered to stay, is that if people spend their pensions on a new house and a buy-to-let—a lot of people are doing that, because the market is roaring forward—that will be money out of pensions, stocks and shares and interest, going into inflating the price of the existing housing stock. It is a half-cocked, opportunistic, massive rabbit pulled out of the bag just before the European elections to appeal to older electors who are likely to vote for UKIP. It would have been nice if he had thought that through for the long-term interests of the economy, rather than his short-term election interests.
The Secretary of State for Wales (Mr David Jones): The hon. Gentleman makes an interesting argument, but is he saying that he does not trust people to make decisions about how to spend their own money?
Geraint Davies: The Secretary of State has been asleep again—come on, keep up! Obviously, I agree that people should have the choice about how they spend their money, but, to them, we should have added choices to invest in a productive Britain in a tax-efficient way. However, the policy was not thought through, so they can spend the money on whatever they like: to go on a holiday or whatever. The Government have responded by saying, “Tell you what, then: we’ll encourage people to find out how long they are likely to live”—[ Interruption. ] I know what the hon. Member for Ceredigion wants to say. He will live 20 years—hopefully longer—and therefore the Government will say, “We will divide your pension by that so you know how much you should spend on ice cream or whatever you choose.”
That is a good idea, incidentally. At a time when we are talking about raising the pension age continually—[ Interruption. ]. I will shut up in a minute. At a time when we are facing the ageing profile of the whole world, and specifically in Britain, the response is to put up the retirement age, but there is a problem with that. For those such as the Secretary of State in clerical jobs without too many manual demands or requirements to be out in the wind and cold, life expectancy will be quite high, which is good news. However, for someone who has been on a building site since the age of 16 and is now asked to keep on working for another five years, that is different. The Government’s idea that there should be an assessment of how long one is likely to live is therefore good and that should be factored into the debate.
I know that other people want to speak. It has been a great joy to share those thoughts. The Budget clearly has lots missing from it and I look forward to the day when we celebrate the next Labour Government, which will put proper, sustainable growth back into Wales and Britain.
The Chair: Before I call the next speaker, if there are no Divisions in the House, I intend to call the Front Benchers to speak at 3.30 pm.
2.42 pm
Mr Mark Williams (Ceredigion) (LD): It is a pleasure to be called—at last—after 42 minutes. When I came here at two o’clock, I thought that—uncharacteristically —the attendance was impressive. On the Government Benches we had recruits from my hon. Friend the Member for Montgomeryshire’s debate on S4C this morning. Strangely, in the past 42 minutes, the attendance has dwindled, I say to the hon. Member for Swansea West. However, it is a pleasure to speak in this debate.
I apologise to the Secretary of State for Wales and the shadow Secretary of State for missing their exchange this morning, owing to that debate on S4C, an important institution. That gave me the opportunity to celebrate a great export from Wales, namely “Hinterland”, which is winning awards throughout the world and was filmed in my Ceredigion constituency.
I want to speak to the terms of the debate. We have had wide-ranging contributions from colleagues from around the country. I want to focus particularly on the Budget’s implications for small businesses, which are critical to our economy. They are the backbone of the economy, not least in constituencies such as mine. I want to relay what I have heard from small businesses in my area about how some of the Government’s moves are indeed having a positive impact.
A measure announced in last year’s Budget that is starting to have such an impact, as my hon. Friend the Member for Brecon and Radnorshire reminded us this morning, is the introduction of the £2,000 a year employment allowance for businesses and charities to offset against their employer national insurance contributions bill, as well as the abolition of NICs for under-21s. In the current financial year, that will benefit 35,000 businesses across Wales, and will entirely exempt 20,000 businesses from national insurance contributions. Many small businesses are looking forward to the opportunity to take on new workers and see this measure as a positive and real boost.
This year’s Budget also saw more help for small businesses, with the doubling of the annual investment allowance—the amount companies can invest tax-free—to £500,000. That was announced along with proposals in the Budget to consult on whether and, if so, how to match SMEs that have been rejected for a loan with alternative credit providers. There are also proposals on how to create quicker processes for when an SME wants finance elsewhere and needs quick action from its bank, a business bank pilot for wholesale guarantees to incentivise banks to lend more to SMEs. One critical comment I still hear from small businesses in my surgeries and on my visits to them is about the scale at which banks are lending.
The CBI Wales director welcomed this proposal, saying:
“The doubling and extension of the annual investment allowance, together with making the seed enterprise investment scheme permanent, will be a shot in the arm for many medium-sized businesses.”
With 57% of Federation of Small Businesses members across the UK wanting to grow their businesses over the next 12 months, doubling the annual investment allowance for small firms to the end of 2015 will provide certainty and allow them to realise their investment expectations.
Alarmingly, when the previous increase to £250,000 tax-free was announced, the FSB noted the concern about how few businesses were aware of that provision. I am sure the Secretary of State will share my concern on that front and work with Assembly colleagues to ensure that such measures announced in the Budget are publicised to the small business community across Wales.
There was also the welcome news that the expected fuel duty increase has been abolished, assisting businesses and working families. The Chancellor confirmed that the next duty increase in September has been scrapped, making petrol 20p less per litre than it would have been under the previous Administration, saving motorists £11 each time they fill their tank with fuel. That is critical for those of us who live in rural areas, where cars are necessities, not luxuries, and will be of help to many other businesses in their transportation costs.
That is welcome, but may I be allowed to put a slight sting in the tail? In many parts of the country in sparse rural areas we are spending a disproportionately higher amount on fuel, as are our businesses, and are not likely to benefit from any fuel duty derogation. That is a matter for regret.
Business rate relief came into effect this April in England. In the Welsh context, I welcome the measures announced by the Financial Secretary to the Treasury, the Secretary of State and Jane Hutt towards the end of last year that business rates would finally and completely be devolved to Wales. That is the second matter that businesses present to me as one of urgency. The chairman of our chamber of trade in Lampeter has facilitated a meeting in my surgery later this week to discuss the issue, and the ever-growing number of empty shops in that town.
Devolution of rates would be welcomed in that town. I would be grateful for an update from the Secretary of State on how those discussions are developing. Although the Silk commission had things to say about business rates, the Government response to pre-legislative scrutiny pointed out that no additional legislation was required, but I gather there have been discussions on the topic. There is acknowledgment that this would be another essential tool for the Assembly Government to address in particular the decline in some of our high streets. I would be grateful to hear how those discussions are going.
Alun Cairns: I consider myself to be a pro-devolutionist, but does my hon. Friend also recognise that many of the organisations that are demanding additional powers for the Assembly automatically assume that it will lead to reduced rates? Should they not also look occasionally at the Welsh Government’s record where they do have power? For example, council tax increases were close to 5% on average across the whole of Wales, or certainly for my authority, whereas they were broadly frozen across England. People need to be careful what they wish for.
Mr Williams: I agree with the broad thrust of my hon. Friend’s comments. I shall mention council tax a little bit later. It is fair to say that on the devolution of business rates, it is not the usual suspects who are arguing for devolution just as a matter of principle. I was going to quote next Iestyn Davies of the FSB, who said, positively:
“There is now no barrier to the Welsh Government reforming the business rates system to support small firms on high streets across Wales”.
The Country Land and Business Association says:
“Wales will have the opportunity to steer its own destiny and stimulate the rural economy as a result of gaining full control of business rates”.
I sincerely hope that, given the opportunity to exercise those powers to the full, there would be a mechanism in place more responsive to areas of the kind that my hon. Friend represents, and indeed that I represent. I live in hope, but I think that that is a decision that should rest with the National Assembly, and ultimately with people marking crosses on ballot papers.
Guto Bebb: Does my hon. Friend share my concern that the decision to offer a £1,000 rebate on business rates that was made in the autumn statement was replicated in Wales only on the final day on which that decision could be made, 31 March? That left businesses in the lurch for four months, not knowing how to plan ahead for the new financial year in Wales.
Mr Williams: I agree with my hon. Friend. He makes the comment because he believes in it, but it was a comment not unfamiliar to me, made by many businesses across the Ceredigion constituency.
Alun Cairns: Does my hon. Friend also recognise—and ask those bodies which are calling for full devolution of business rates to recognise—that the potential consequences are less generosity than in England, as in some cases where the Welsh Government currently have powers for business rates? Again, we need a positive pro-business policy agenda from the Welsh Government. That is not always forthcoming.
Mr Williams: I agree with that. Representing a rural constituency in mid Wales, we are often seen as detached from some of the initiatives that have come from Cardiff Bay. I do agree with the thrust of my hon. Friend’s comments. I still strongly support the devolution of business rates, not just as a matter of principle. However, the challenge is to our colleagues in Cardiff Bay to act accordingly.
The Budget lacked any measures to address the growing concern at the level of VAT affecting the tourism sector; I hope that the next Budget will include such measures. Having talked to tourism operators in my constituency, I think that VAT in that sector will be a growing, emerging theme over the coming year. This country remains one of only two in Europe that are not taking advantage of EU regulations that would allow reductions of VAT for tourism and hospitality. I know that there is a great debate about the extent of that but in areas like mine, reductions in VAT on tourism, thereby increasing the number of visitors to Wales and reducing the costs on those businesses, could prove a huge stimulus to the tourist sector, on which Wales depends hugely.
These are the issues that are of concern to small business owners in my constituency: business rates, transportation costs, the very positive news on the reductions in national insurance contributions and growth in opportunities to invest in their businesses. I sincerely hope that these measures will buttress small businesses
in my area and enable them to grow. While the recovery may not be robust in all areas geographically, the signs are there. The FSB will tell you that its latest index of confidence released in March shows that the confidence of Welsh firms has risen to its highest level since the index began in 2010.It would be remiss of me not to mention one other fundamental achievement.
Geraint Davies: Will the hon. Gentleman give way?
Mr Williams: I will not because the hon. Gentleman spoke for 42 minutes.
It is a Liberal Democrat achievement, namely the increase in the personal allowance. I am glad that the coalition Government, with its Liberal Democrat component, has pushed that. I remember being told at public meetings in the constituency that I have the honour to represent that raising the personal allowance was unaffordable and would never happen. But that has had a huge impact.
Chris Evans (Islwyn) (Lab/Co-op): The hon. Gentleman no doubt welcomes the rise in the personal allowance, but does he not agree that it has been made affordable by the 24 tax rises we have seen since this Government came into power four years ago?
Mr Williams: I thank the hon. Gentleman for that intervention. I was going to come on to the mismatch in one sense in the debate. When we articulate the view that working families are benefiting to the tune of £800 a year, people are not fools and they look at their books. They look at how much money they are spending on petrol. They look at the other cost of living increases. I just want the hon. Gentleman and others to reflect on how different the situation would be without that £800 benefit. We had a debate this morning about progressivity in the tax system. How can anyone argue that taking millions of people out of the tax regime altogether is not a progressive tax policy? The increase in the tax threshold means that an additional 14,000 people are no longer taxpayers in Wales. That is worth celebrating.
Stephen Crabb: My hon. Friend makes an important point. Does he agree that a great many of those people, particularly the additional people who have been taken out of paying income tax altogether, are those on the very lowest incomes? The people who will benefit from it most are the people who need it the most.
Mr Williams: I agree. That is why it is a hugely progressive policy. The hon. Member for Islwyn was in part right in what he said. It goes back to the other point made by my hon. Friend the Member for Vale of Glamorgan when he talked about council tax. I had a letter from a constituent a couple of weeks ago who commended the Government for the policies that we have taken on tax thresholds but sadly lamented the fact that the 5% increase in council tax levied on my constituents in Ceredigion would severely eat into that gain. That is to their eternal shame.
2.58 pm
Chris Evans: It is a pleasure to serve under your chairmanship, Dr McCrea. I apologise to the Committee for not attending the morning sitting. I want to start by saying that the Chancellor of the Exchequer has once proved himself to be the Harry Houdini of British politics. He tells us that he has pulled off an economic miracle, but if we scratch at the surface we see it is just a sleight of hand. He has failed on every target he set himself since coming to power four years ago. On the one test he said we should judge the Government by—paying off the deficit within the term of this Parliament—he will fail. Yet all we heard in the Budget was the cheering to the very rafters of what the Government termed a Budget for savers.
The centrepiece of this so-called Budget for savers was freeing people from the need to buy annuities. Trust in them, the Government said, we are setting people free and it is wonderful. Even the pension industry said that people would look on this announcement with optimism, pride and enjoyment. Well, I worked in the pension industry for two years and most people I know who have anything to do with pensions have met this measure with bemusement and befuddlement, which are all that it will bring about. It does not address the real problem that the return on annuities has been miserly. But what is the alternative?
When this measure was introduced in Australia, it resulted in more people paying off their mortgage, buying cars and going on holidays, but they were then left relying on a miserly state pension. If the same thing happens in this country, we will see people having a maximum pension pot of only £6,000. That is compared with a maximum pension pot and state pension in Sweden of £25,000.
Alun Cairns: Does the hon. Gentleman oppose the change made in the Budget? Does he think that a future Labour Government—however far in the future that might be—should reverse it and stop people having immediate access to their pension savings?
Chris Evans: Well, with the hon. Gentleman advising the Prime Minister, I am sure that a Labour Government will be round the corner soon. I digress. If the hon. Gentleman had not intervened so soon, I could have finished my point and been clear. No, I am not against people not buying annuities—[ Interruption. ] I am not against people opting out. If the hon. Gentleman will listen, I will tell him my views. The simple fact is that the return on annuities is not as good as it should be. People should be given the choice, but what investment products are they going to invest in? There are 9 million people in this country who will have only the safety net of the state pension when they retire, and that issue has not been addressed.
The only people who will opt out of annuities will be the ones with the most money. It is another sleight of hand from the Chancellor. If people draw down their pension pot earlier, they will start paying tax earlier, so it is actually a swizz for the Treasury.
The hon. Gentleman will know—because he worked for the same banking establishment that I did—that this measure is dependent on people getting good advice. Will they get it? I am not sure. The real problem in this
country is not opt-in annuities or whether to allow people to invest in whatever they want: it is that people are confused by pensions. We do not think about something as simple as making a long-term investment, but we should. It is not on the radar for so many people in their 20s and 30s—a time when they should be making provision. I am seriously worried by several instances where the equity release market has not been properly regulated, including some examples of abuse. I am worried that people will use their pension pots early for different purposes and will then have to take up an equity release scheme, meaning that their children would not inherit the house in which their parents had invested money.People might also choose to invest in property. There is nothing wrong with people investing in property they intend to live in, but that could also push up the housing market. Like many of the Government’s proposals—such as the pasty tax and the caravan tax—it might seem good on paper, but the consequences have not been worked out.
Jonathan Edwards: I have some sympathy with the points the hon. Gentleman is making. At this very moment, the speculators and the spivs in the City are coming up with all sorts of interesting financial products for when this radical change is implemented. Unless it is very carefully managed, there could be another mis-selling scandal around the corner.
Chris Evans: The hon. Gentleman has read my mind; I was coming to that point. When I worked in the pensions industry, one thing I learned was to question the point of investing in a pension plan. The money is invested in a stock market that can go down or up, or it gets funnelled off into massive bonuses for the fund managers who are misusing pension pots.
Most pensioners in my constituency are risk-averse. What will they be offered instead of a pension pot? Should they put their money in the stock market, which can be volatile? Why did the Government not propose alternatives to annuities, such as other tax-efficient vehicles for investment? For example, we could have a not-for-profit vehicle that invested in Britain’s infrastructure. Why not allow pension funds to invest in things such as schools and hospitals? That would also free up money for the Government and save money. The Government could have made proposals along those lines, but such suggestions were missing from the Budget.
Alun Cairns: Is the hon. Gentleman proposing a new form of private finance initiative? That has been opposed by many of his colleagues, but that is the sort of package he has just suggested.
Chris Evans: I keep giving way to the hon. Gentleman, but he has yet to say anything sensible.
Ian Lucas (Wrexham) (Lab): I am sorry that I came in only part-way through my hon. Friend’s speech because I am very interested in what he has said. I am keen that such investment vehicles should be localised, so that people have the ability to invest in their local community and provide jobs for young people in their community.
Chris Evans: I entirely agree. These pension pots are an untapped source for so many local projects. I was unkind to the hon. Member for Vale of Glamorgan, but this is not PFI. This is about a pension pot invested in local infrastructure projects, as my hon. Friend says.
David Morris: I am missing something here and I mean this with respect. If a pension company invested in a local enterprise, a school or whatever, how would it get the money back?
Chris Evans: It is quite simple. If the contract is awarded to a builder, then the money would come back that way, or something like that—[ Interruption. ] This is typical of the Tories. I see the hon. Member for Aberconwy shaking his head. The problem is, the sheeple opposite have their minds closed to everything, because as we have seen with the Government over four years, they are always right and they are never wrong. If they want to go that way, let them—
Guto Bebb: I was shaking my head, because when the hon. Gentleman was asked to explain his PFI-lite project, his answer was: “The builder will get the contract, then he will pay money back, or something like that”. If that is the extent of the thought that has gone into the proposal, it is no wonder I shake my head in disgust.
Chris Evans: The hon. Gentleman has a small majority in Aberconwy and we cannot wait to see the back of him if that is his attitude—[ Interruption. ] I am in the vale of Glamorgan as well, and I will be glad when Tory Members lose their seats, because then we are likely to have some sense in the argument—[ Interruption. ]
Chris Evans: The truth is— [ Interruption. ]
Chris Evans: The hon. Gentleman is not even a Welsh member, so let us challenge him. Why does he not come to Wales and stand in a Welsh seat and see how he does with that?
Ian Lucas: What is really depressing about Government Members is that they fail to recall what happened in 1986, 1987 and 1988, when pension mis-selling was born—under the Conservatives. Pension mis-selling wasted the well-funded and hard-earned pensions of many millions of people which the incoming Labour Government in 1997 had to arrange to repay. The Conservatives are going back to exactly the same place and creating a new crisis for us all.
Chris Evans: I entirely agree with my hon. Friend. It is nice to see some sense in this debate. The truth is that pension holidays came about—[ Interruption. ]
The Chair: Order. If hon. Members want to intervene, they should make that clear. If not, the hon. Gentleman should continue.
Chris Evans: I am glad you called order, Dr McCrea, as the debate was getting a bit out of hand. My hon. Friend the Member for Wrexham is absolutely right. Pension mis-selling happened under the auspices of the last Tory Government, as did pension holidays, which
caused shortfalls in pension funds. In some cases—for example, Royal Mail—the pension shortfall outweighed any FTSE 100 share index, all because of the way pension holidays were allowed.Alun Cairns: Does the hon. Gentleman think that the tax on pensions by the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) had any impact on the performance of the funds, and if so to what extent?
Chris Evans: This is getting me down. All the hon. Gentleman wants to do is replay the past. We can debate the past all we want, but we are talking about the Government’s proposals, and they have no ideas in that respect—[ Interruption. ] Here we go again: the hon. Gentleman laughs and giggles and carries on with his little games, but he cannot deny that under my right hon. Friend the Member for Kirkcaldy and Cowdenbeath we saw record growth, more investment in schools and hospitals, more policemen on the streets and more nurses. That was down to the Labour Government. Government Members are being wise after the event—that includes the Chancellor, who, if I remember rightly, committed to follow Labour’s spending plans. Now they accuse us of having run up a structural deficit and all those things after the event. The truth is that the Chancellor was wrong.
The big thing about the Budget is what was not there. There was no help for young people trying to get on the ladder. Before anyone tries to intervene, I know that unemployment is down and that expected growth is now higher than in any other western country, but this is still the slowest recovery for 100 years. This recovery is not helping Wales—many people in my constituency just ain’t feeling it. As the hon. Member for Ceredigion said, people are not feeling it at the petrol pump, or when they go to the supermarket, or when they get their pay slip; their money is not going further. What help is available to them?
It is true that income tax bands have risen, but that has been offset by 24 tax increases, the biggest of which was VAT going from 17.5% to 20%, which is still crushing people at the pump. People point out that food is zero-rated, but that food still needs to be transported. The hauliers—like everyone else who is being taxed—need to pass on their costs. Dukes and paupers alike have to pay VAT—there is no way out of it, and that is the real concern.
The real issue in everyone’s constituency is the increase in fuel poverty. Families are in fuel poverty when they pay more than 10% of their income to energy companies, and many have to do just that. What is the Government’s response? They say “We are going to change the way that fuel poverty is measured,” and they say that Her Majesty the Queen is considered to be in fuel poverty because she pays more than 10% of her income on energy. We have seen no help from the Government; no one has stood up to the energy companies—compare that to Labour’s energy price freeze. What we now see is an economy that helps those in London.
The economic theory behind the Budget—that a tax cut for those high in society will trickle down—failed in the 1980s. As George H. W. Bush famously said in 1981:
“trickle-down economics is voodoo economics.”
It is rare for wealth to trickle down in that way.
We also see the stoking of the housing boom, and I am concerned that we are heading the same way as we were in the 1990s. Things might be right for the Conservatives now as they head towards a general election in a year’s time, but I am concerned that the boom might go unchecked. I have some sympathy with the Government: people like to think that their house is going up in price, but in reality a housing boom stops young people getting on the housing ladder and makes it harder for people to move. We need to do more about that.
The one issue that is really affecting my constituency is the bedroom tax. In Crumlin, 70% of council tenants are victims. In the village next door, Newbridge, 60% are affected by the bedroom tax. The reason is simple: in the 1940s and 1950s, council houses were built by Aneurin Bevan for those returning from war. Two, three and four-bedroom houses were built for people’s families to grow up in. Now, the children have moved on. It is heartbreaking to tell someone in their 70s or 80s that they must move out of the three-bedroom house that they brought their family up in.
Stephen Crabb: Anyone in their 70s or 80s would not be affected by the changes to housing benefit. Pensioners are specifically exempted—[ Interruption. ]
Chris Evans: Yes, they are target voters. Perhaps I should not have said those in their 70s or 80s, but those in their 50s and 60s. The bedroom tax has led to instances of real cruelty and I hope that the hon. Member for the Vale of Glamorgan will listen to this example of the effect of the policy. A blind couple in Blackwood are entitled to one bedroom, but they each have a guide dog. Under the rules, they are not allowed an extra bedroom for the dogs. Even those dogs need somewhere to rest at night, but that is ignored. How can the Government honestly defend their policy when it causes such problems?
I am really concerned that the Budget was about the short term, not the long term. It did nothing to rebuild or rebalance the economy. There was no investment in green industries. There was no mention of rebalancing the economy, and that is the real problem that we have as we approach the general election. On the one hand, we have a Government who are more concerned with the richest in society and, on the other, the Opposition—an alternative Government—who talks about extended child care and frozen energy bills. These are the real issues for the election in a year’s time, and I look forward to having that debate.
The Chair: Order. Two Members have indicated that they wish to speak. We have 14 minutes before we start the wind-ups, so I ask them to be considerate.
3.16 pm
Guto Bebb: I shall be suitably brief. On the case encountered by the hon. Member for Islwyn of a couple who had two guide dogs, I hope that he asked his local authority whether discretionary housing payments were
available. If the answer was negative, I would wonder whether Caerphilly was one of those councils that made an application for further funding under discretionary housing. Only three of the 22 local authorities in Wales did, so it is important if the Labour authority in Caerphilly did not ask for that funding.Chris Evans: The Labour Caerphilly authority is a shining beacon on tackling the bedroom tax. It knows that there is a problem. Housing officers go out to people’s homes to give them a benefit check and all the help they can get, and I know that, in this case, the couple have been given all the help that they could be given. The point is that the system created that case when there was no need for it.
Guto Bebb: I am afraid that the hon. Gentleman is mistaken again. The discretionary housing benefit is intended to support those in the worst possible situations. There was no clarification as to whether the money was available, so we shall take that as an indication of what has happened. Just in relation to the situation in my—[Interruption.] The hon. Gentleman is making significant assertions about the policy without being able to indicate what the Labour authority in Caerphilly has done. If he is able to clarify that, I should be grateful.
Chris Evans: I have told the hon. Gentleman what has been done, but he needs to realise that it is absolutely amazing that he is trying to make political capital out of a couple who are blind. That is the truth; it is shameful.
Guto Bebb: The hon. Member for Islwyn raised the issue in order to make political capital. Furthermore, it is shocking—
The Chair: Order. Will the hon. Member for Islwyn please be civil to the hon. Member for Aberconwy?
Guto Bebb: Thank you, Dr McCrea.
Again we see an indication of how the Labour party in Wales responds to any challenge to its views. The truth is that the economy of the south Wales valleys has been decimated, yet that area that has been represented by the Labour party for 100 years. Labour Members have the cheek to tell us how to manage an economy, yet when we look at the valleys of south Wales, we see the arrogance of a one-party state in which an individual who has been elected cannot clarify a case that he has highlighted for party political purposes.
Guto Bebb: I shall not give way any longer to an individual who is willing to shout names across this room in such a manner. The truth of the matter is that one member of this Committee made party political points to score points on the basis of somebody with a disability, but that individual was the hon. Member for Islwyn, not me.
The debate has become so passionate because Labour Members know that this was a Budget for business, a Budget for employment and a Budget for saving. For example, on income tax, rather than depending on the state to hand out money to people, the two parties in coalition are reducing the tax burden on individuals. We are ensuring that people can earn more and keep more of their money, rather than depending on handouts for which they are supposed to feel grateful to the Labour party. It is no coincidence that, during the previous general election, trade unions phoned up people in my constituency—unlike the hon. Member for Islwyn, I won my constituency, rather than inherited it—to say that if they voted Conservative, they would lose their tax credits. They did that because the Labour party wants a client dependent state. The Government parties want to give people the ability and freedom to earn their living, pay their own way and not be dependent on the state. We understand that human dignity means the ability to earn a living, pay one’s way and not be dependent on the arrogance of a Labour party that has failed Wales time and time again. We should be proud that we trust people to be responsible for their own finances.
Ian Lucas: Will the hon. Gentleman give way?
My hon. Friend the Member for Ceredigion highlighted the importance of the Budget for the self-employed. Economic recovery in Wales is dependent on small businesses and people’s willingness to invest in their own businesses. It is dependent not on Government intervention, but on people starting and growing their own businesses, and employing people. The £10,000 personal allowance is not only about trusting people with their own money. A significant majority of the businesses in my constituency are run by self-employed individuals, either by themselves or in partnership. A husband and wife running a bed and breakfast in my constituency of Aberconwy will now be able to make £20,000 a year without paying any tax. They will not spend that £20,000 on enjoying life; they will reinvest it in their business and decide to employ people because they know they can trust the Government to ensure that if they make long-term decisions for the benefit of their business, they will be better off.
Unlike the Labour party, the Government are reducing the burden of employing staff. We introduced the £2,000 employment allowance to reduce the cost of employing staff and to ensure that people are not penalised for employing staff. We have not heard a word from Labour Members in recognition of that change. The truth is that they want to complain, but they will not talk about the Government’s success in ensuring that the unemployment rate in Wales is lower than that of the rest of the UK, which was not achieved during Labour’s years in government.
We heard the truth about how the Labour party feels about pensions from the hon. Member for Islwyn, although he did not have the courage to say that he would oppose our policy. Once again, the truth is that this Government trust people to make the right decisions with their own money. Let us be honest: if people who have saved up for their retirement can be trusted to look after their financial situation when they get to old age,
they can be trusted to make the right decision about how to plan for old age. However, what we get from Labour Members is the need to control—they think that the state knows best.Labour Members also completely ignore the fact that the Government are introducing parity for the self-employed in the pension system. The single-tier pension system, which is being introduced by the Government at a difficult time, will guarantee people a £146 pension, rather than the means-tested, abysmal pension that the Labour party offered. The Government have installed the triple-lock, rather than the 75p increase implemented by the Labour party. I will take no lessons from a party that was willing to insult our pensioners with a 75p increase. Labour Members know nothing about being right and nothing about the economy, and they know very little about being fair to our pensioners.
I am delighted that the Welsh Government have followed the lead of the Westminster Government on business rates. Labour talks about how concerned it is about the cost of living crisis, but the one cost of living issue it can control in Wales is council tax, and time and time again it has been found wanting. Labour Members talk about food banks, but the Labour leader of Conwy council was able to say that the change in council tax equated to only a loaf of bread a day, so he was quite happy to cost the average working family in Aberconwy a loaf of bread a day, yet the Labour party has the hypocrisy to turn up in this place and argue that we are guilty of pushing people into food banks.
We have had the Budget of a Chancellor who has turned around the economy. We took over the mess that the Labour party left us. We took over from a position where the deficit was £175 billion, but we are turning the economy around. We have the highest rate of growth in the western world, yet the Labour party does nothing but carp. I was proud of a Budget that trusted the people of this country, that trusted the savers of this country, that trusted the small businesses of this country and that trusted the people who are willing to do the right thing by themselves. This was a Budget of a party and a coalition that are confident about the future of this country. The Labour party has nothing to offer apart from the childish signs of the hon. Member for Islwyn—[ Interruption. ]
Guto Bebb: I am proud of this Budget and I have confidence in this Budget. The response of Labour Members tells us all we need to know about Welsh Labour: it is a failing party that has failed Wales once too often.
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Jessica Morden (Newport East) (Lab): I cannot promise the wide-ranging coverage of the Budget offered by my hon. Friends the Members for Swansea West and for Islwyn, but I want to return to an issue raised by my hon. Friend the Member for Pontypridd: insecurity in the job market. The Secretary of State outlined the welcome drop in unemployment. We would all welcome growth in the economy. We all welcome getting more people into good employment and we all want to see more people in work. However, as the hon. Member for
Monmouth kind of said when talking about zero-hour contracts, if we scratch the surface, the picture is very different.The coalition claims that more people are in work than ever before, but that masks the reality of a job market in which 75,000 people in Wales are potentially employed on zero-hour contracts. There is a 30% increase in people working part time who want a full-time job. About 300,000 people in Wales are paid under the living wage, and about 7% of jobs in Wales are at the minimum wage, while the UK average is 5%. Yesterday, as we heard, the Resolution Foundation reported on a surge in self-employment, which is also relevant to Wales. Jobseekers are turning to self-employment not out of choice, but because of absolute desperation, and they are being paid up to 40% less than the average employee.
Ian Lucas: As the hon. Member for Aberconwy would not take an intervention, may I take this opportunity to mention the tax that the Liberal Democrats and the Tories will never talk about—value added tax—which both of them increased for everyone, contrary to their election promises when they came into power in 2010?
Jessica Morden: My hon. Friend makes an extremely good point, but I hope that he will forgive me if I rush on with my speech.
Such a job market is a real concern for my constituents, but it is not addressed by the Budget. There is not a good picture out there. Last week, I asked a constituent to describe what life on a zero-hours contract was like. People do not normally come to my office to say, “I’m on a zero-hours contract.” They come about another issue, such as debt, but when we get talking, they tell me how they are being exploited.
The Secretary of State said this morning—I apologise if I do not quote him exactly—that the constituent I mentioned in an intervention should be grateful to have the hours that she had. That was the constituent who said of a zero-hours contract:
“you are neither employed nor unemployed. You are in a grey area in between. Should there be shifts available they are generally short notice and if you need to arrange childcare, it's nigh on impossible which results in having to decline the shift. Too many declines result in being moved from the active register and future shifts not being offered to you. Even if you have worked when the work is available and worked at short notice employers have no obligation to keep you employed or give you notice should work cease”.
This is a mother of three working in the care sector. Her husband was on a zero-hours contract, having been reduced from 40 to 14 hours. Accessing benefits with such irregular work is a minefield, and accessing child care at short notice—there is no help through tax credits because of irregular hours—is extremely tough.
While the Committee was sitting this morning, a family came into my constituency office to discuss a zero-hours contract. The man had been on JSA and was pressured into taking a minimum zero-hours contract. In the first week he had 18 hours, in the second week, 14, and in the third week, seven. In the fourth week, he worked three and a half hours, and in the fifth week there was no work. I could go on, but hon. Members will get the picture. The job contract states that he has
to make himself available to work as and when required. He has asked for more hours, but none are available. The situation hits his council tax benefit. His housing benefit was stopped and he has lost his tax credits because he falls below the minimum requirement of carrying out 24 hours of work a week. He also lost free school meals for his family. His family of six are now surviving on child benefit.That situation shows where the cost of living crisis is most acute. People face the same housing and energy costs, and the same food bills, yet they have a completely irregular income. Given that, alongside the benefit changes, it is no surprise that 80,000 people used Trussell Trust food banks in Wales last year. We learned this week that the situation will be even worse under universal credit because people will be forced to take zero-hours contracts despite there being no guarantee of work.
I have no more time, but I am proud that my party will ban the exploitation around zero-hours contracts, look at the exclusivity and availability issues and draw up a code of conduct. The Budget was a missed opportunity to tackle such problems in the job market.
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Nia Griffith (Llanelli) (Lab): We have had a thorough and wide-ranging discussion this afternoon. I would like to draw some of the strands together and ask Ministers to take some key points back and consult their ministerial colleagues on the issues that concern us about the position of people in Wales. We have heard a great deal in the past few weeks of the Chancellor of the Exchequer trumpeting his Budget, but many people in Wales do not feel the benefit of any recovery. That word is alien to their experience of life. They are being constantly bombarded by increases in the cost of living, by wages that do not cover the cost of living, by decreases in real terms in their wages and benefits, and by several other particular problems that I will now discuss.
In real terms, wages are down £1,600 a year since the Government came to office. The Office for Budget Responsibility recently confirmed that people will definitely be worse off in 2015 than they were in 2010, with families losing out on £890 on average in cuts to benefits and tax changes.
While we may be seeing a housing bubble in London, to which my hon. Friend the Member for Swansea West referred, that is not the reality for many families in Wales. They are wondering why the Chancellor chose to stick to his tax cut for people earning more than £150,000 a year, of whom there are few in Wales, when many others are paying the price through increased VAT and real-terms decreases in their wages and benefits. They have been even more horrified recently to see a culture of bank bonuses back and the Chancellor going off to Brussels to make the case for allowing those bonuses rather than accepting an EU curb on them.
The real anger against the banks is felt by small businesses. As my hon. Friend the Member for Wrexham said, small businesses are struggling to get the finance that they need. He would like some responses from Ministers to his suggestion of having regional banks that could take in money locally and then give it out locally to support indigenous business, rather than our always being subject to the vagaries of international
companies that come here, go there. He has seen severe job losses in Wrexham, as we have also seen in recent days in Newport.We have been told that things are good for manufacturers, but we do not seem to be doing so well on exports. We do not seem to be doing as well as we would like, and the rebalancing of the economy does not seem actually to have taken place. We are in danger of reinflating a bubble through some sort of housing boom, rather than through real improvement in our manufacturing infrastructure.
Many people have mentioned food banks, and it is sad that food banks have become such a necessary part of life for so many people. Some 79,000 people in Wales will use a food bank this year.
David Morris: On those figures, I have been in touch with the Trussell Trust about my local food bank in Morecambe—albeit Morecambe is not in Wales. The trust divides a region and apportions it a food bank, which is not representative of how many people use that food bank individually. I do not want to get into an argument on whether food banks are necessary. I believe that people out there are starving, and I have never denied that, but to be responsible we must find out why they are starving and why they are going to referral groups. We need to keep those records, and the Trussell Trust is just not doing so. That is what the chief executive told me, and he has put it in writing. I would be glad to share that information.
Nia Griffith: Indeed, and I would be glad to share the briefing that we have received from the Trussell Trust in Wales, where the trust does keep a record of the numbers. The trust’s estimate speaks of 79,000 people needing to go to food banks this year. Not only does the trust keep records of the people who go to food banks, but there are stringent conditions under which people can do so. The trust likes people not to become dependent on it, as I believe might be the case in the United States, but to use it in emergencies only and to have other solutions sorted out.
The trust has kept a detailed record of exactly why people go to food banks: 30% go because of benefit delays and changes; 20% go because of low income problems; 17% go because of changes in the type of benefit that they have been claiming; 8% go because of debt; 3% go because of unemployment—that is notable because many people who go to food banks are in work; 2% go because of sickness; and 2% go because of domestic violence. Those are the actual figures that have been provided to us.
David Morris: I thank the hon. Lady for giving me those figures, but the Trussell Trust cannot give them to me—I have asked it for them for the past six months. I would like to see those figures from the Trussell Trust and where the hon. Lady got them from.
Nia Griffith: I am sure that we can find the appropriate means to share the figures. If the hon. Gentleman cannot access them on the website, we will try to get them across to him.
David Morris: They do not exist—[ Interruption. ]
Nia Griffith: We have had a briefing, and perhaps if the hon. Gentleman were an MP representing a Welsh constituency he would have been sent them, too.
There is a real issue, and we do not want anyone to have the humiliation of going to a food bank, because it is a humiliating circumstance; it is not something that people want to do, and it is not something they undertake lightly. The difficulty is in addressing the causes. We had a debate only a couple of weeks ago on Capita and the personal independence payment. Will Ministers in the Wales Office please talk to their colleagues in the Department for Work and Pensions about the delays that people have experienced in getting personal independence payments? What will happen when universal credit comes in? Far more people will have to be reassessed, and there is a worry that such delays are sending people to the Trussell Trust. I hope we can see that put right.
One of the other big problems that has been mentioned, particularly by my hon. Friend the Member for Newport East, is zero-hours contracts, part-time working and underemployment. We have seen a massive increase in the number of people on zero-hours contracts.
Jonathan Edwards: I have heard many contributions on zero-hours contracts during the debate, but the hon. Lady will know that the Social Services and Well-being (Wales) Bill has just completed its passage through the National Assembly, where Plaid Cymru moved an amendment to ban zero-hours contracts in the care sector in Wales, which is a devolved matter. The Labour Government voted with the Tories against that amendment. Can she explain why?
Nia Griffith: The important thing is that there is a real effort by a number of public bodies in Wales to look at what is behind those zero-hours contracts and why they are used and to find ways of eliminating them, possibly through procurement measures. At the moment employment law is a reserved issue; therefore this has to be dealt with here. That is why a future Labour Government would introduce measures to tackle the worst abuses. I was very glad to hear the hon. Member for Monmouth talk about the detriment that exclusivity clauses can cause. It should be everybody’s right to work for more than one person and not be exclusively kept for 24 hours a day, seven days a week at the beck and call of one company. That is certainly one of the changes we would like to introduce.
We would like to go further than that and deal with the issue of where regular hours are worked, but the person is not offered a proper contract. We have seen the work that USDAW has done with three large supermarkets that have no zero-hours contracts. They look at annualised hours and there is flexibility, but there is also a guarantee of a certain amount of work. That can work. One of our suspicions is that zero-hours contracts are often used because they are actually zero-rights contracts and allow the employer to hire and fire at will, with absolutely no employment rights—no statutory period of notice, for example, or statutory sick provision. There is something seriously wrong with keeping employees in such an immense state of uncertainty for so much of their working lives.
Another difficult issue that my hon. Friend the Member for Newport East highlighted is part-time working. In the last few years, some 86% of the new jobs created have been part time—these are people who have possibly
been looking for longer hours in what we might call the under-employed category. Although we are certainly glad to see a decrease in the unemployment rate in Wales, the worry is that it masks an awful lot of people not getting the sort of work they would really like.We have also had some discussion about the minimum wage. What more could Ministers do to tackle abuses where the minimum wage is not properly implemented in Wales? We also mentioned low-wage economies and the number of Welsh workers—some 300,000—who actually work below the minimum wage. We have promised to incentivise employers to raise wages to the living wage by giving them a tax break. The money would be recouped through the savings in tax credits. A number of Members made some interesting points. My hon. Friend the Member for Islwyn told us a great deal about the pensions reform and mentioned the Chancellor’s failure to sort out the deficit.
The hon. Member for Carmarthen East and Dinefwr, who speaks for Plaid Cymru, talked about public sector workers paying the price for the banking crisis. He also mentioned that UKTI should direct foreign investment into poorer areas, in a way that he says happens in Germany. He mentioned a company in his constituency where 100 jobs depend on our remaining in the European Union. That point was reiterated by my hon. Friend the Member for Swansea West, who talked about people needing to stop running around creating a great deal of fear about us leaving the European Union and focusing on the fact that so many jobs depend on our being in the EU.
The hon. Member for Monmouth waxed lyrical about his beliefs in climate change, which are fairly unique to him. He also made the point about the difficulties that the carbon floor price has caused for our industries and the fact that the Government are three years late in trying to resolve the issues that this has caused. The hon. Member for Ceredigion championed small businesses and remains puzzled that the fuel duty rebate was never extended to Ceredigion—as, indeed, do we, given that he is a good Liberal Democrat Member of Parliament. He also referred to the increase in council tax, but did not mention the fact that this is directly linked to the UK Government cuts to the Welsh Government. It was fairly inevitable that that would be the situation.
My hon. Friend the Member for Swansea West spoke at considerable length on economics. [Interruption.] Absolutely. He also mentioned the bedroom tax, which affects some 40,000 people across Wales, 25,000 of whom are disabled. Without repeating the arguments we had last Thursday, I again ask Ministers to look into this, because it is severely cutting income for people in our communities. The result of all the income cuts I have mentioned today is that money is still not circulating well in Welsh communities. We are still not seeing a revival on the high street, because people do not have the money in their pockets to spend. It has been completely eroded by VAT, the rise in the cost of living and the fact that fuel prices in Wales are a particular problem—both in south Wales, where, because the options to switch supplier are extremely limited, people have some of the highest fuel prices in the UK, and in rural areas, where there is less opportunity for people to switch at all. They usually have only one or two very limited options.
All these areas need to be addressed. We would like this Government to do some of the things we have suggested, such as implementing a proper freeze on fuel prices and following that through with a proper break-up of the energy companies, as well as ensuring that pensioners in rural areas can access fuel payments early so that they can get in supplies of oil in the cheaper summer months. We would also like firmer action on zero-hours contracts and a much better readjustment of the taxation system, so that we are not taking money off the poor to subsidise the rich.
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Stephen Crabb: May I say, for I think the second time this week, what a pleasure it is to serve under your chairmanship, Dr McCrea? I trust it has been an interesting afternoon for you in the Chair, in a typically wide-ranging Welsh Grand Committee debate—[ Interruption ]—at times rambunctious, as the shadow Secretary of State says from a sedentary position, as well as passionate and not a bit turbulent.
It is a pleasure to follow the hon. Member for Llanelli. She again paints a picture of poverty and desperation in Wales, which does not tally with the picture that is emerging in the Welsh economy, which is bringing benefit to communities in her constituency and up and down Wales. The truth is that there is a recovery and it affects not just the City of London and the south-east, as the hon. Member for Swansea West would argue, but is reaching all parts of the United Kingdom. It is delivering benefits to communities in all parts of the United Kingdom, yet there is still a long way to go. It is not until—to quote one Opposition Member—people are feeling it at the pumps, when they go to the supermarket to buy their weekly shopping or when they look at their pay packet at the end of the month that they really know that a recovery has arrived in Wales.
Our ambition as a Government is not just to see Wales get the crumbs of an economic recovery, but for Wales to be at the forefront of the economic recovery. When we see, for example, an unemployment rate in Wales today that is lower than the UK average—when has that ever been the case?—average wages in Wales increasing faster than the UK average and, as the Prime Minister remarked today at Prime Minster’s Question Time, the positive employment picture in Wales, we have reasons to be optimistic that Wales will benefit from this economic recovery and will not get left behind. That has happened in previous economic recoveries, when it felt as if previous upward turns of the economic cycle bypassed Wales altogether.
Geraint Davies: The hon. Gentleman mentioned Swansea. It is worth remembering that Swansea council is now cutting £25 million of services—I know that this is a devolved area, but the reason for that decision is the reduction in the overall package for the Welsh Government. Something like 60% of the people affected by the bedroom tax are now in arrears. It is not all rosy. There are some glimmers, but it is not a happy picture.
Stephen Crabb: Nobody is saying that there is a rosy picture, or that there has been an economic miracle. We are saying that there has been positive progress and that there is a long way to go. The reason for that positive
progress is that difficult decisions were taken two, three and four years ago to put right the economic fundamentals of the country, to start to reduce the deficit to restore order and stability to our national foundations. Those are the foundations for a sustainable economic recovery. If we are interested in seeing a rebalancing in the economy, not just a short-term boom and bust, we must fix those fundamentals.Rebalancing the economy was at the heart of this year’s Budget. I draw particular attention to the package of measures to assist manufacturers with their energy costs. If I scroll back to 12 months ago, we were getting a lot of representations—I know that Opposition Members were, too—from large manufacturers in our constituencies, such as Tata Steel, Celsa Steel and Kronospan up in north Wales, in Chirk, about the impact of high energy costs on their operations. Those are big employers that create high-quality jobs, often in communities where there is not a lot of alternative employment available.
Twelve months ago, my right hon. Friend the Secretary of State for Wales and I organised intensive-energy industries in a group and listened to their concerns. We got them to meet the Business Minister at the time and officials from the Department for Business, Innovation and Skills. We organised their views and communicated them. Twelve months later, industry in Wales is pleased that this Government have listened to its concerns. The measures that we announced to assist with energy costs—a package worth £7 billion in total—has been welcomed by industry in Wales. Those plants were saying to us 12 months ago that their viability as an operation could be threatened by high energy costs. We are increasing their competitiveness and making those plants more viable, which means that we are creating more security for the jobs that those industries provide in all our constituencies across Wales.
Ian Lucas: Will the Minister confirm that the policy changes he is now praising are his Government’s policies?
Stephen Crabb: There is a range of policy levers that affect the cost of energy for business. Some of them were put in place some time ago, some of them more recently. They impact on certain industries in different ways. It was important to identify industries that had no alternative to using large amounts of energy for their manufacturing processes, and find ways to make their operations more competitive and sustainable. That is what we have done, and that is why businesses, which I met again a week ago, were telling us that they were pleased with what the Chancellor announced in the Budget.
Our policy is all about safeguarding jobs and continuing the job growth that we have seen in the past two years in Wales. The Opposition have today presented a picture of an employment crisis in Wales, which I think was a phrase used by the shadow Secretary of State. That is distinct from the positive picture that the Prime Minister drew attention to at Prime Minister’s Question Time today, and to that painted by his friend the First Minister in Cardiff, who also welcomed the positive developments in the Welsh labour market, in which we are seeing a high level of employment growth. The Opposition have created a caricature of what is happening in the Welsh labour market.
The Opposition talk about zero-hours contracts. There are serious issues with the growth of zero-hours contracts, and I will come on to them in a moment. However, we are talking about 2% of all jobs in the UK. There has been a sharp increase, but we are talking about 2% of employment contracts in the UK. The vast majority of new jobs that were created in Wales and throughout the UK last year were full-time permanent jobs.
Owen Smith: I wonder whether that is down to the Minister’s numbers or the ONS’s numbers, which were fourfold higher than the Government previously announced.
I said this morning that 900,000 young people in Britain were unemployed. That, in my view, constitutes a crisis, and I stand by that word. I simply ask the Minister: how many more young people need to be unemployed in Britain before he considers it a crisis? A million seems like a lot to me.
Stephen Crabb: For every single individual unemployed, it is an unemployment crisis for them. No one is talking down how serious an issue it is when there are large numbers of unemployed people. We are seized of the issue, and we are working incredibly hard through different partners. I have spent a lot of my time as Under-Secretary of State for Wales visiting communities in the south Wales valleys and elsewhere in Wales, where strong steps are being taken to assist those who have been unemployed the longest.
The use of zero-hours contracts in Wales has grown, as it has in the rest of the United Kingdom. People on zero-hours contracts are typically women, people in full-time education or older workers. Certain age categories feature strongly in the profile of those who are on zero-hours contracts. Opposition Members will shout me down for saying this, but a lot of people on zero-hours contracts have made a positive choice to be in that kind of working relationship because they want the flexible working pattern that a zero-hours contract affords them.
David T. C. Davies (Monmouth) (Con): My wife works as a translator and fits that description—except the bit about being older. However, it would be outrageous if her employers—the police and the NHS—were to say she cannot work for anyone else. The issue is not the zero hours but the fact that people are being told that they cannot work for someone else, which is unfair.
Stephen Crabb: My hon. Friend makes an important point. For some people a zero-hour contract is a positive choice because it fits the circumstances of their life, but serious questions should be asked about things such as the issue that my hon. Friend raised. That is why my right hon. Friend the Secretary of State for Business, Innovation and Skills launched the first Government consultation into the use of those contracts and whether they are being abused. If they are, we want to know about it so that we can understand it and find the remedies.
I want to say to the hon. Member for Llanelli, who spoke before me, that the use of zero-hours contracts increased by 75% between 2005 and 2009, on the previous Labour Government’s watch. At no time did I hear her or any of her colleagues questioning the use of zero-hours contracts. At no time did I hear a Labour Government
Minister in the previous Parliament say we should have a consultation to look at their use. The hon. Member for Carmarthen East and Dinefwr drew attention to the fact that when the hon. Lady’s Labour party colleagues in the Assembly were given the opportunity to vote against zero-hours contracts, they chose not to.More action could be taken. Some Labour-run councils in Wales make heavy use of zero-hours contracts. If Opposition Members really were serious about this issue, as they have pretended to be today, they would be hammering on the doors of their colleagues in Cardiff Bay and those who are running councils to say, “Why on earth are you using those contracts? They are immoral.” The truth is that they are not immoral, but they can be abused. We want to understand that better so that we can take appropriate action to stop it.
There has been a lot of talk today about Jobs Growth Wales, the positive scheme that the Welsh Government are running. The mistake that Opposition Members make is to hold up Jobs Growth Wales and the Work programme side by side and compare them. The shadow Secretary of State did exactly that, and said Jobs Growth Wales is “in stark contrast” to the Work programme. The truth is that they do two different things. Jobs Growth Wales is for young people who are job-ready, which means they are able to slot straight into working life and get cracking. A significant number of people in Jobs Growth Wales are young graduates who have come out of university and found themselves unemployed. Jobs Growth Wales does not work with the hardest-to-reach unemployed people who have been out of work for the longest time, as the Work programme does. The Work
programme works with those who are the furthest distance from the labour market, who often have complicated needs and challenges that need to be tackled before they are job-ready.Jobs Growth Wales will succeed only if there is a sustainable job at the end of it for the young person. Once the six months’ wage subsidy comes to an end, the young person must move into a sustainable job, but there will be sustainable jobs for those youngsters only if the economy improves, business confidence increases and employers feel able to create full-time, paid positions once the wage subsidy comes to an end. That brings me back to what I was talking about at the beginning: putting in place the right foundations for a sustainable economic recovery.
Opposition Members can champion the success of Jobs Growth Wales, but it will be only a short-term success if there is not a sustained economic recovery. I must therefore point to the difficult decisions that the Government have taken to fix the economy. If we had followed the Labour party’s path—their plan B economics of more spending, borrowing and debt—we would not have the resource available to help the large-scale energy users in Wales, such as manufacturers, and we would not be able to help the longest-term unemployed. The Chancellor’s Budget was a Budget for rebalancing the economy, supporting the economic recovery in Wales and continuing to grow employment. We want to continue to benefit all our constituencies and the people on the lowest incomes.