Wales: Economy

Lord Bourne of Aberystwyth Excerpts

Monday 7th April 2014 Grand Committee

[Lord Bourne of Aberystwyth (Con)]

First, I congratulate the noble Baroness, Lady Morgan of Ely, on securing this important debate. I agreed with some of what she said, although I must say that she often exemplifies a creationist approach to politics, as if nothing had ever happened before the Conservative victory and the alliance with the Liberal Democrats in 2010. There were, of course, deep historic problems with the Welsh economy well before 2010. We can understand the challenge only if we consider the historic position of Wales. Wales has had problems of poverty, particularly in west Wales and the valleys well before 2010. Nor is it just about employment, important though that is.

Let me say something about GVA, because that has been an historic problem in west Wales and the valleys, in particular. It has been falling for some time. It was falling well before 1997 and continued to fall until the present. That remains a massive problem with the loss of heavy industry. We have seen the growth of the service sector, which is significant, with employers such as Admiral Insurance, which is in the FTSE 100—our only FTSE 100 company. That is concentrated in south-east Wales. There is Moneysupermarket in north-east Wales, and there are iconic brands, such as Airbus. Much is going on in Wales that is very good.

It is true that the position on employment in Wales is healthy. Unemployment is falling fast and we have a good story to tell. Of course, the noble Baroness did not say that that is also true of England, Scotland and Northern Ireland: it is falling there too, despite the predictions of the Labour leader that we would have 1 million extra unemployed through the recession. We are no longer in a recession; it is not that Wales is coming out of the recession more quickly than elsewhere; we are all out of recession. That is an important point to make. It is the position in the whole of the United Kingdom that unemployment is falling and continues to fall. Nor are the economic levers just with Wales; they are also with Westminster. One thing that was stressed in Silk II—I declare an interest as a member of the Silk commission—was the importance of partnership between Westminster and Wales. I think that we would all subscribe to that, because there are things that have to be done together.

I think that it is fair to say that this coalition Government have pushed things forward where they were not pushed forward by the previous Government. For example, rail electrification, announced first to Cardiff and then to Swansea, had not been tackled by previous Governments—and certainly not by the previous Labour Government under either Prime Minister Blair or Prime Minister Brown at a time when we had more resources. That project is very good news. I know from first hand that the Prime Minister took a great personal interest in it, not least because he travelled to Swansea and recognised the difficulties of that journey and how important it was for Wales to improve on it.

Let us look at the recent Budget. There are many things that successive Budgets have done to help Wales. Successive Budgets from the coalition Government have seen 155,000 people in Wales taken out of tax altogether. In the most recent Budget, which I think has been widely welcomed, the cost of energy has come down, which is good news for Wales.

The noble Baroness mentioned, and I agree with her, the problems at Murco—I declare my interest as chair of the Haven enterprise zone, which includes Murco as our second most significant employer after Valero, also mentioned by the noble Baroness. That situation exemplifies the need for a partnership between Westminster and Wales to save those vital jobs. They are vital for Pembrokeshire, but the whole of that plant is vital for the United Kingdom, as the noble Baroness rightly said. We have lost Coryton. Given the problems of energy security, which have been exemplified and thrown into high relief by the situation in Ukraine, we need concerted action from both Governments to save those jobs. I have contacted the Department of Energy and Climate Change, which would perhaps be more central to this matter even than the Wales Office, to see what it is doing. I look forward to what the Minister has to say in that regard.

So, much that has been happening in Wales is good. There are historic problems and there is some good news that has been brought forward by this Government. I also welcome the news on Wylfa B and look forward to hearing what the noble Lord, Lord Wigley, has to say on that, because I think that he would take a personal interest in it, being from north Wales. I think that all parties, notwithstanding perhaps some difficulties on their policy stance on nuclear energy, have got behind that project and said how important it is. That, too, is something for which the Government deserve credit.

It has not been a question of waging war on Wales; I do not recognise that. That is certainly not the way in which the Prime Minister and the Chancellor have approached Welsh issues. From the referendum held in 2011, which I think was successful from all our points of view, to the commitment to look at Barnett when circumstances make that easier to tackle and a general approach to devolution and other issues in Wales, this Government have a lot to be proud of. Yes, there are historic issues that need addressing, but that is best done in a spirit of partnership. We would do well to recommend that approach to others in another place and at the other end of the M4—a phrase I hate, but it seems to exemplify the correct wording in this regard.

--- Later in debate ---

[Lord Wigley (PC)]

My Lords, I thank the noble Baroness, Lady Morgan of Ely, for facilitating this debate. I share many of her concerns, particularly those regarding European Union uncertainty. However, I admit that I do not recognise other aspects of the Wales that she describes.

The economy of Wales is still, sadly, the poor relation of the UK. Back in the 1960s Wales had a GDP standing at 92% of the UK average. The GVA per head, today’s measure, has Wales down at 72.3% of the UK—the lowest of any nation or region in the UK. London has a GVA of more than £37,000 per year, Wales under £16,000 per year. This decline is a devastating indictment of the failure of public policy over that period.

Before any noble Lord rushes in to castigate our National Assembly and the Welsh Government, I will point out that much of this decline occurred before 1999 and most of the economic tools are in the hands of the UK Government. Under successive Governments this decline has sadly continued. Incidentally, many of us in Wales are indeed getting sick to the back teeth of some Tory politicians, and the right-wing London media in particular, constantly talking Wales down. The truth is that the polarisation between the haves and have-nots among the UK nations and regions has worsened over recent years. The most recent years for 2012 show the GVA of south-east England increasing by 2.5% and that of Wales, as has been mentioned, by only 1.6%. So the gap is still widening.

The main factor in the GDP or GVA disparity a generation ago was the low activity rates in Wales. Wales was then some 6% behind the UK average. This has changed over recent years and that is to be welcomed. Wales now has an employment rate of 71%, closing in on the UK’s level of 72.3%, yet, sadly, the youth unemployment figures, if one looks at the past three years, not just the past year, have risen five-fold in Wales. That is not acceptable.

In Wales, the inactivity rate has decreased to 23.7%—again, something to be welcomed—lower than the north-east, the north-west and the East Midlands of England and of Northern Ireland, yet still our GVA figures are low. The explanation is the poor quality of so many of the new jobs in Wales. Too many are at the rock bottom of wage levels and many are part-time, zero-hour contracts. This is as much a problem in rural Wales as it is in the old industrial valleys. The two worst blackspots in terms of average wages being below living wage levels of £7.65 an hour are Dwyfor Meirion in north-west Wales, with 39.9% of its workers below a living wage level, and the Rhondda at 39.7% below a living wage level.

[Lord Bourne of Aberystwyth]

My Lords, against that background we have perhaps all been overcritical of politicians here, so does the noble Lord welcome the fact that the Secretary of State is hosting a job summit in west Wales, talking to local government and local employers to see what the Wales Office can do to help?

[Lord Wigley]

I welcome initiatives taken by anyone to improve the situation in Wales. To that extent, it is not a party political question; it is a crisis facing all the people of Wales, particularly those on low incomes.

In total, 23% of Welsh workers are below the living wage level. Surely all working people in Wales should receive a living wage. We need to generate jobs paying top-level salaries and wages, not just at the bottom, and public policy must be geared to achieve that. To my mind, one of the worst decisions in recent years was that of Rhodri Morgan to abolish the Welsh Development Agency. I very much regret that that was supported by all parties in the National Assembly, including my own, and including by the noble Lord, Lord Bourne. Even if the WDA cannot be re-established, the Government of Wales should look seriously at the proposal put forward last month by Plaid Cymru, and endorsed by the Federation of Small Businesses, to establish a private sector-led body to identify investment opportunities for EU funds. There is a real danger of EU strategic funds being squandered by successive Governments on projects that do not produce self-regenerative economic growth.

There is a pressing need for much higher capital investment projects, and in that context I include Wylfa—very much so—the M4 link road and the electrification in the south of Wales but also through to Holyhead. Given the Assembly’s limited borrowing powers at present, it is to be welcomed that there is a development in the legislation coming before Parliament but it will be years before it is fully developed if we have to wait for yet another referendum for it to be approved. It is ridiculous that the limited tax-varying powers in the Government of Wales Bill should need a referendum. Why can the Government not take such decisions without running for a plebiscite cover on the most trivial change? If the Government justify themselves on the basis that the Silk recommendations called for that, why ignore the Silk proposal to break free of the lockstep constraint on those tax changes? We also need a public sector development bank in Wales, as they have in Germany, to support small businesses that are neglected by the high street banks.

To secure economic recovery, Wales needs a business-friendly Government with a commitment to the specific needs of Wales, who are not driven either by a statist bureaucratic dead hand or by the perennial prerequisite of protecting the City of London at every turn. The domination of the UK economy by London has gone on for too long. For the sake of Wales, and indeed many regions of England, we need new thinking on that matter, and we need it urgently.