Wales: Cost of Living

Lord Howarth of Newport Excerpts

Monday 2nd December 2013 Lords Chamber

[Lord Howarth of Newport (Lab)]

My Lords, I ask the Minister: what responsibility do the Government consider they have to assist the industrial areas of Wales? Wales is experiencing economic change on an unprecedented scale and at an unprecedented pace. Digital technology, globalisation and the rise of new industrial economies have unleashed tsunamis of disruption on the regions that pioneered the first Industrial Revolution, notably south and south-east Wales. The mature industries of Wales are being battered by competition from businesses in newly industrialised economies that enjoy state-of-the-art technology, which Welsh industries certainly ought also to have, and pay very low wages, which could not and should not be paid in Wales.

Where manufacturing continues and prospers—and there are still magnificent manufacturing businesses in Wales, and we are very proud of them—the workforce is being hollowed out by automation and off-shoring. That hollowing out is occurring among the white collar workforce as well as the blue collar workforce. We are seeing the development of the gap between the 1% and the 99%, with fabulous increases in wealth and income for a tiny minority at the top and really significant real-terms falls in income for a great many people lower down the scale. Therefore, the challenge for the Government is to develop policies to overcome the traumatic distributive consequences of contemporary economic growth.

The Government have a duty to help businesses and individuals cope with this whirlwind of economic change, but the coalition’s response to that challenge is to do the very opposite. Instead of an industrial strategy redeploying some of the wealth arising from property values, financial services and exportable services, the Chancellor has engineered an asset bubble, which he calls a recovery. The Governor of the Bank of England clearly has doubts about the validity of this recovery but, from the Chancellor’s point of view, these are policies not in the interests of Wales but to help his party get through the election.

The ethic of the Government is: “To them that have, more shall be given”. Instead of an intelligent welfare state that stays alongside people who are the casualties of economic change, helping them to reconstruct their lives, the Chancellor abuses them as shirkers and people who cannot be bothered to open the curtains in the morning. He cuts their benefits and at the same time he cuts the taxes of the 1%. Instead of a strategy to raise our educational levels and skills to those of our competitors, the Government wage an ideological war against local educational authorities and raise fees for university education to insupportable levels.

For Wales, devolution is a device to absolve the Government of responsibility. They tauntingly propose to people in Wales, whose incomes are on average significantly lower than the incomes of people in England, that they should vote in a referendum so that the Government of Wales should have income tax-raising powers; thus they would be able to borrow to pay for infrastructure and all will be well. Ministers must know that that strategy is disingenuous. The sums cannot possibly add up. Devolution should not be a device to get the Government off the hook. These infrastructure developments would benefit the whole of the United Kingdom and the cost ought to be borne fairly across the United Kingdom.

The cost of living crisis is a crisis of structural change, of growth that benefits only the rich, top managers and shareholders. The creative destruction of capitalism is not going to lead to a free market nirvana in the regions that experience very much more destruction than creation. What responsibility does the Minister consider the coalition has to support people in the crisis of industrial Wales?