Support for the Welsh Economy and Funding for the Devolved Institutions

Jo Stevens Excerpts

Tuesday 5th July 2022 Commons Chamber

[Jo Stevens (Cardiff Central) (Lab)]

I thank the right hon. Member for Preseli Pembrokeshire (Stephen Crabb), Chair of the Welsh Affairs Committee, for securing this debate and for his excellent chairship of that Committee, which does valuable work for all of us in Wales. I also thank all Members who have contributed to the debate. We have had a number of wide-ranging contributions. This debate must be set in the context of the current economic climate. After 12 years of Conservative Government, with help from the Liberal Democrats for five of those years, we have a high-tax, low-growth economy, with the country suffering the biggest drop in living standards since records began and the highest tax burden since world war two.

The reality is that the Welsh Government’s budget over the spending review period we are discussing is, as has been mentioned, likely to be worth at least £600 million less than it was when it was first announced last autumn, because of that rocketing inflation. As my hon. Friend the Member for Newport East (Jessica Morden) said, the outlook for inflation, economic growth and any additional funding looks very bleak indeed. The spending power of the Welsh Government’s budget is therefore likely to deteriorate further. That is why the Welsh Labour Government have called on the UK Government to update their settlement to reflect the significant impact that inflation is having on important budgets being spent in Wales.

If we look at the UK Government’s record, leaving aside for the moment the squalid nature of the lawbreaking, the sleaze and the U-turns happening day after day, what stands out on spending is that they make many promises and deliver on very few of them. They have made promises to Wales and they have broken them.

Let us start with the explicit manifesto promise in 2019 that Wales would not be a penny worse off when it came to post EU membership replacement funding. We have heard a lot about that today. The Secretary of State and his colleagues have repeated that promise over and over again, but the facts are that Wales is set to lose more than £1 billion of vital funding.

My hon. Friend the Member for Aberavon (Stephen Kinnock), in a tour de force of a speech, went into detail about where the shortfall is placed; it is through the shared prosperity fund, the community renewal fund and the cut to Welsh rural communities. All of that adds up to more than £1 billion less than the Government promised. That is a broken promise to the people of Wales.

[David T. C. Davies]

rose—

[Jo Stevens]

No, I think the hon. Gentleman has had plenty of interventions today. I will carry on because we are quite short of time.

As for the levelling-up fund, only six Welsh councils saw any benefit from the first round of the fund and just one of them was a Labour council. I will just leave that there, but I wonder why that was. The second round of applications to that fund has been delayed because the Government have not been able to get their application portal ready in time for the original deadline. They cannot even get the basics right on this.

The Government are using the UK Internal Market Act, as we have heard, to take decisions in devolved areas, excluding the Welsh Government from a transparent process of joint decision making for the shared prosperity fund. They are imposing a methodology on Wales for how those limited funds are decided on, which results in money being distributed away from the poorest areas in Wales. The Conservatives refused to countenance the Welsh Government’s alternative funding formula, which would have distributed money more fairly across Wales according to economic need. Let us be clear: this is a far cry from the rhetoric of levelling up and protecting the Union. It is this Prime Minister and this Government who are the greatest threat to the Union.

Turning now to infrastructure funding for Wales, I know the Secretary of State will not like this, but I am again going to raise the classification of HS2 as an England and Wales project by his Government. A £4.6 billion Barnett consequential is not going to Wales. I know he is tired of hearing about it, but it is not just me saying it, or even just Labour. The right hon. Member for Preseli Pembrokeshire, Chair of the Welsh Affairs Committee, agrees. His entire Select Committee agrees in its report. The leader of the Welsh Conservatives agrees—or is the Secretary of State the leader of the Welsh Conservatives? I do not think anybody is really sure.

The Treasury’s rules for evaluating infrastructure projects do not work in the interests of Wales, but have prioritised infrastructure projects in the south-east of England. Costs for HS2 and rail enhancement are allocated to Wales, but none of the benefits apply. In fact, HS2 explicitly disadvantages south Wales. The analysis of the Secretary of State’s own Treasury colleagues confirms that HS2 will result in an economic disadvantage to Wales of about £150 million every year. Because rail infrastructure is not devolved beyond the core valley lines, Wales, unlike Scotland and Northern Ireland, gets a double whammy: no £4.6 billion consequential and an annual economic hit. We have heard that there will be no mainline electrification in north Wales. Mainline electrification from Cardiff to Swansea was promised and then abandoned by the Conservatives. About 2 million tonnes of steel will be used across HS2, but Transport Ministers have confirmed that there is no target for the use of UK steel or Welsh steel in HS2 construction. This is such a missed opportunity for Wales, for Welsh steel jobs and for the people of our steel communities. The Government have got this all wrong and Wales is, literally, paying the price.

This does not just affect transport infrastructure. There are knock-on effects across climate change targets—the need for greater use of public transport and more active travel, with the consequential effects on health and wellbeing—and, critically, on narrowing the economic inequality that Wales suffers compared with other parts of the United Kingdom. As my hon. Friend the Member for Cynon Valley (Beth Winter) said, the truth is that this Government are holding Wales back. They are making decisions that take money from the people who can least afford it. The Conservatives voted to cut the £20 universal credit uplift, voted against free school meals, voted to increase tax during the cost of living crisis, and voted against a windfall tax, until they had to do a screeching U-turn forced by Labour. What is the Prime Minister’s response to the cost of living crisis? We hear today that he has invited the First Ministers of Wales and Scotland to a summit in the autumn—so more delay and more inaction while he focuses entirely on saving his own skin.

Contrast that with what the Welsh Labour Government have been doing, taking decisions that support households in greatest need to mitigate the worst impact of those Conservative Government decisions. The Welsh Government have invested more than double what they have received in consequential funding from the UK Government to support households with the cost of living crisis, and that support has been targeted at those who need it most. About 75% of households are expected to be supported in some way, and nearly twice as much will go to households in the bottom half of the income distribution compared with those in the top half. My hon. Friends the Members for Aberavon, for Newport East and for Cynon Valley spoke about all the measures that the Welsh Labour Government have been taking to help families and businesses in Wales. I would add these to the list: during the pandemic, businesses in Wales were able to access the most generous support package anywhere in the United Kingdom; and through Jobs Growth Wales Plus, over 19,000 young people have been helped into good-quality, meaningful employment across Wales. This is what a Labour Government in Wales deliver, solving the problems the Conservative Government have created.

A UK Labour Government will build a stronger, more secure economy, working hand-in-hand with the Welsh Labour Government for the benefit of everyone in Wales. We will get the cost of living crisis under control and make the whole of Britain more resilient, more secure and more prosperous, laying the foundations for a thriving, dynamic economy.