Wales: Economy

Baroness Morgan of Ely Excerpts

Monday 7th April 2014 Grand Committee

Asked by

[Baroness Morgan of Ely]

To ask Her Majesty’s Government what is their assessment of the prospects for economic recovery in Wales.

[Baroness Morgan of Ely (Lab)]

My Lords, historically Wales has languished economically behind the rest of the UK for generations. Following the boom years of the coal era, harsh reality struck in the 1970s and 1980s when communities across the country were devastated by the loss of big industry—coal and steel, in particular. Wales has taken a long time to readjust to the new world, but at last we are seeing really positive signs of growth. That growth is currently outstripping the rest of the UK thanks in large part to a completely different approach in Wales using direct intervention—good, old-fashioned Keynesian economics by the Welsh Government. We moved to plan B rather than sticking to Osborne’s plan A for as long as he did and we are reaping the rewards quicker.

Rather than declaring a war on Wales the Conservatives should be looking to emulate the success of the Welsh Government on the economy. Unemployment rates in Wales have been tumbling, with the unemployment rate in Wales now lower than in England, Scotland and Northern Ireland. Can you believe it?

[Lord Thomas of Gresford (LD)]

What does the noble Baroness mean by a war on Wales? Who is supposed to be waging a war on Wales?

[Baroness Morgan of Ely]

It is pretty clear that there have been attacks and noises coming from Ministers, such as Grant Shapps, for example, who visited Wales and said that the Government are using Wales as a battering ram ready for the next general election.

Plan A by the UK coalition Government in large part has cut and cut public services white crossing their fingers in the hope that the private sector will take up the slack. The Welsh Government have deliberately taken a different approach and intervened in stimulating economic growth through a number of measures, standing by the struggling private sector in maintaining jobs through the tough times of the recession, stimulating economic activity through maintaining Welsh Government investment in infrastructure, and developing an aggressive approach to stimulating inward investment and boosting an export drive.

These measures are now paying off, which is, I suggest, the main reason why Wales is coming out of the recession quicker than other parts of the UK. The unemployment rate in Wales is now 6.7%, lower than the UK average of 7.2%, a 20% reduction in the past year. Despite the fact that there has been a 31% cut in real terms to the Welsh capital budget between 2009 and 2016, the Welsh Government have reserved £1.3 billion of investment in capital funding to improve Welsh infrastructure—more money for transport, housing and flood defences.

Wales will be one of the first countries in the world to ensure superfast broadband for 96% of properties. In England the figure is 90%. Upon completion, Superfast Cymru will make Wales the most connected country in Western Europe. Inward investment in Wales has increased by 200% and produced 7,000 new jobs. Who knows, though, what impact the ambivalent attitude of the Tory Government towards EU membership will have on inward investment in future?

One of the first things that the coalition Government did on coming to power was to scrap the Future Jobs Fund. Wales reacted by creating its own Jobs Growth Wales plan, which has created 11,000 job opportunities for unemployed 16-24 year-olds in Wales. However, while I think it was right for the Welsh Government to concentrate on unemployment because it is the key to better health, better education and better outcomes overall, we are still struggling in terms of wealth. Wales is still poorer relative to the UK as a whole, but the Welsh economy is growing at 1.6%, one of the fastest rates in the UK. The problem is that we are starting from a low base.

We need to continue our focus on driving up GDP levels, a much tougher task. This is about what kind of jobs we have in Wales and encouraging the export of Welsh goods. The Damocles sword hanging over the Murco oil refinery could reduce our export figures significantly. The oil refineries in Milford Haven are critical to the Welsh economy. The Valero refinery alone is responsible for 25% of all Welsh exports. So the closure of any refinery would not just have a devastating impact on employment in the area, but would have a disproportionate impact on Welsh GDP figures. I know that the Welsh Government are doing everything in their power to try to save the refinery. What is the Secretary of State doing to help to find a buyer for the plant? The Welsh Government have developed a programme of support that identifies and helps to build companies’ capacity to export. This is already paying dividends, with an increase of 11% in exports compared with a rise of just 0.4% for the rest of the UK.

Central to improving GDP is the need to build the skills of the Welsh people and to upskill the workforce, ensuring a good stream of graduates. Despite the fact that some Conservative MPs have suggested that applications to universities from people living in Wales are down, the truth is that when the Tory-led Government trebled tuition fees there were 42,000 fewer applications from English students while in Wales there was a fall of just 100. That was because the Welsh Government stood by students from Wales, capping the fees at £3,000. Welsh apprenticeships have seen completion rates rise from 54% in 2006 to 85% in 2012, beating England’s 73% completion rates. Some 90% of these have gone on to find sustained employment or engage in further learning.

There needs to be a particular focus on developing skills in the engineering sector, which will be key to the economic growth prospects of Wales in future. The Royal Academy of Engineering has suggested that there are 95,000 Welsh people who declare themselves as being engineers; 30% of those are over 50 years old and yet only 1,500 applicants were accepted on to engineering courses in 2012-13.

Given the profile of the engineering workforce in Wales, there are not enough young people coming through the system to replace the ageing workforce. That will ultimately result in skills shortages and we will have to recruit from outside Wales. A deliberate focus on that and on driving up the pool of those able to enter the field through better results in maths in school is imperative. Again, the Welsh Government’s focus on numeracy in schools should help with that.

The gap between Wales and London has now become a gulf. Although that has certain advantages in terms of the costs of living in house prices and childcare costs in Wales compared to London and the south-east, the coalition Government need to demonstrate to the country that they are in touch with the pressures that are still being felt outside the M25. We have not seen much evidence of that. The measures that they have taken to stimulate the economy have exacerbated the situation rather than helped it, as evidenced by research by the Centre for Cities, which recently suggested that for every public sector job created—yes, created—in London, two have been lost in other cities. The Help to Buy scheme has undoubtedly helped to cause a housing bubble in London, causing huge resentment outside the capital, where people watch as those who have already bought watch their wealth grow with no effort. That is not help for hard-working people; it is the luck of the draw on where and when you bought a property. It is also unsustainable in the long term.

In December, the UK Government announced their £375 billion infrastructure spending plan for the next two decades. If Wales were to get its 5% share, we should see £18.7 billion of investment coming to Wales. We know that the Wales Office boasts of £2.5 billion of investment that will come to Wales, but I ask the noble Baroness where and when we will see the rest of it and what we can do to speed up spending of the investment already promised. Will we see any of the infrastructure promised by the UK Government delivered during this Parliament?

Wales is absolutely on the right track in terms of the prospects for economic recovery, but more needs to be done to ensure that the two arms of government at UK and Welsh level co-ordinate their efforts to reduce the gap between Wales and London. That means more economic intervention from the UK Government and a more proactive regional approach further to stimulate the Welsh economy and to cool down the overheating that is occurring in London. I ask the Minister to ask her Government to stop the war on Wales and engage in more constructive politics with the Welsh Government. England could learn from Wales on the economy; and, yes, on aspects of education and health, Wales could and should learn from England.

--- Later in debate ---

[Lord Ahmad of Wimbledon (Con)]

The noble Lord’s time is up. This is a time-limited debate to 60 minutes. We can have a brief intervention, but my noble friend needs to conclude his remarks.

[Baroness Morgan of Ely]

Will the noble Lord comment on the fact that average costs of childcare in Wales are 10% lower than in England in every segment of care from under-twos to after-school clubs. So there is propaganda in his comments that is absolutely not true.

[Lord Thomas of Gresford]

I am quoting the Family and Childcare Trust’s 2014 survey. In conclusion, there is a massive agenda for the Welsh Government to tackle, but the truth is that the Labour Administration is failing not just the Welsh people but the whole concept of devolution for which we fought.