Budget Resolutions and Economic Situation

Jonathan Edwards Excerpts

Thursday 24th June 2010 Commons Chamber

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

In my speech today, I will examine several different issues of Welsh, UK and international significance, noting the impact of the new Budget on the Welsh economy and Welsh families and communities. However, I begin by asking whether the Budget was even necessary, never mind whether it deserves the billing of an “emergency Budget.” It was clearly a political and ideological Budget, designed to shrink the state, and not one that was economically needed.

Indeed, even the Financial Times columnist, Sam Brittan, called it a “totally unnecessary budget” in his column of 18 June. We already had figures from the March Budget from the new Office for Budget Responsibility, and we all knew that the major announcements are actually the cuts that will be announced in October in the comprehensive spending review.

On Tuesday, the UK Government confirmed that, except for health and overseas aid, departmental budgets are to be cut by 25% during this Parliament. If we map that level of cuts on the position in Wales, around 60,000 public sector jobs are at risk—15,000 more than the 45,000 job cuts planned by Labour in March. Indeed, based on today’s Financial Times figures, 65,000 public sector jobs are in danger in my country. That is very worrying for many families in Wales, and we believe that it is unnecessary and avoidable.

Clearly, the national debt and deficit must be tackled, but there is a question of timing, and I cannot believe that increasing the cuts in this way and at this time is in any way beneficial to the people of Wales. However, the implementation of the recommendations of the Holtham commission on funding and finance in Wales would be beneficial. A major plank of that was the recommendation that a floor of 114% of English spend be implemented immediately, to ensure that Wales does not lose out further under the Barnett formula.

Plaid Cymru is not alone in calling for that. Government Members may recall that the Liberal Democrat leader in Wales said on 7 June 2009 that

“the Westminster Government should act immediately”

in introducing a floor. That £300 million a year would save around 9,000 public sector jobs in Wales, but would be only the first step on the way to the fairer, needs-based formula that we need. It is therefore disappointing that all this has been put on the back burner. With so much work on the issue contributed by Gerry Holtham and his team, as well as three other independent reports, I cannot see the need for an additional commission after a successful referendum on further powers for the National Assembly.

There were other areas where the new Budget is both tough and unfair. The most important are the cuts in the welfare budget, to the tune of £11 billion in coming years. As figures in the Financial Times showed, any cuts in welfare or the public sector hurt areas that are already in need of more. The change from upgrading benefits according to retail prices index inflation to upgrading them according to the consumer prices index will mean a lower rate of benefit growth than before, as well as a stealth saving. Having worked for Citizens Advice Cymru, I can tell hon. Members that people who rely on benefits will struggle because of those changes, and we are talking about real people and families on low incomes, not the “welfare scroungers” that the political right like to caricature.

Specifically, the proposals to lower the number of people on disability living allowance are a cause for concern. In Wales, more than 240,000 people are on DLA. Having seen the impact of tribunals and stricter qualification criteria on other benefits, we have concerns about how the new changes to eligibility will be implemented and who will make the final decision. What appeals system will be in place, for example? We and disability groups support getting people into work. That is a good thing, but when such schemes are suggested, especially in such a manner and in such a Budget, there is a wider concern that they are just a means for getting people off benefits, rather than supporting them back into work.

I must also say that, in many parts of the UK, even if people are able to work, they cannot. Some parts of my country have very few jobs available, with between 10 and 15 registered jobseeker’s allowance claimants for each advertised job, and that is even before adding people who are switched from disability benefits. It is the same with parents of young children going back to work. If the work is not available and we are forced into making savage cuts in the public sector, how are those people to find work?

However, there are some steps in the Budget that we welcome. There was a recognition that Wales and other parts of the UK have not shared in economic growth in the past and that a level playing field is required. Quite how Labour managed to create or accept a situation where only one private sector job was created in the north or midlands of England, but 10 were created in London, is beyond me. That shows Labour’s failure of imagination in growing or developing a balanced economy. However, the Conservatives’ proposal to allow a national insurance holiday is hardly likely to correct the years of economic centralisation in London and the south-east of England, or rebalance the economy geographically.

A more far-reaching idea might be the regionalisation of corporation tax according to gross value added. That would give the poorest nations and regions a competitive advantage. In west Wales and the valleys—the areas that I represent—GVA is only 64% of the UK average, so additional assistance to equalise that across the UK would be warmly welcomed. Another avenue might be the devolution of that tax, so that the Welsh Government could make their own decisions, within EU regulations. Bolder moves to develop the Welsh economy are needed than those given in the Budget. The route map for economic renewal, to be launched in a few weeks’ time by Welsh Deputy First Minister Ieuan Wyn Jones, will provide more nuanced, Welsh solutions.

Changes that bring about real-terms cuts in benefits and public sector pay freezes punish those who had nothing to do with the economic mess created by the banks. The general public will contribute £13 billion extra towards the deficit through the VAT hike. The bankers will pay a measly £2 billion a year through a levy, yet still see huge benefits in shifting their profits from income tax to capital gains tax. The levy is not only small; it is being introduced only gradually. The banks will not be squealing as a result of this Budget, as the cuts in corporation tax will compensate for the levy. Considering that the Public and Commercial Services Union estimates that there is £123 billion of uncollected tax, far from demonising vulnerable people struggling to get by, would it not be better if the Government targeted the super-rich for their tax avoidance and evasion? Instead, cuts to Her Majesty’s Revenue and Customs staff will reduce capacity to collect due tax from those intent on not paying their fair share.

There were elements of the Budget that must be welcomed, not least the increase by £1,000 of the level at which income tax is paid by basic rate taxpayers, a Plaid Cymru policy at the general election.

However, a further disappointment for my country in this Budget is that although confirmation was given of other transport schemes in England, the electrification of the Great Western line was noticeable by its absence. I do not need to remind you, Mr Deputy Speaker, that Wales ranks alongside Albania and Moldova at the bottom of the electrified rail track league table. Without a concrete timetable for either electrification of the Great Western line or the creation of a high speed rail link to south Wales and north Wales, we will languish there much longer.

Far from all of us being in this together, the emergency Budget aimed its axe at the poorest and the most disadvantaged communities, while being more or less “business as usual” for the economic elite.

[Several hon. Members]

rose—