Leaving the EU: Infrastructure in Wales

Nick Smith Excerpts

Tuesday 17th January 2017 Westminster Hall

[Christina Rees (Neath) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship for the first time, Mr Flello. I commend my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty) for securing this important debate and setting out the issues in his usual elegant style. I associate myself with many of the comments made by my hon. Friend the Member for Bridgend (Mrs Moon). I was a Bridgend councillor before I became an MP, and she was my MP. It is always a pleasure to follow my hon. Friend the Member for Torfaen (Nick Thomas-Symonds).

Infrastructure is important in all parts of the UK, but in Wales, the region most affected by deindustrialisation, which is still reeling from neglect of public spending in the 1980s—a place which has mountains and valleys in abundance—the need for investment in all forms of infrastructure has never been greater. The uncertainties of leaving the European Union remain fraught with danger. Beyond the loss of environmental protections, trade agreements and workers’ rights, the impact on the economy is still unknown. However, in Wales the threat to structural funds remains a primary concern, and one that will define the Brexit negotiations and the Government’s ability to respond.

A reduction in the amount of funding available for infrastructure projects in Wales, should the UK Government not commit to fully replacing it, will be catastrophic. It is widely accepted that Wales has been a net beneficiary of the European Union, benefiting from billions of pounds of investment. The referendum results across Wales suggest that that message did not permeate communities, but that is astonishing, given the facts that surround the argument. The annual average allocation of EU funding in Wales is €65 per person, compared with €13 across the UK. Wales receives over six times more European structural and investment funding than England. That is not only astounding and depressing, given the qualifying criteria, but concerning given our potential reliance on the funding, and on the UK Government’s commitment to underwriting it after we leave the EU. To put things into context, the European regional development fund, the only European structural and investment funding directly concerned with infrastructure, committed €106 million to Wales during the 2014 to 2020 programme, under the theme of network infrastructures in transport and energy.

Allow me to highlight some real-life examples of the difference that those vast figures make to infrastructure projects in Wales. The superfast broadband business exploitation project, which seeks to increase the take-up of fibre and ICT infrastructure by small and medium-sized enterprises, has secured €6.3 million in the regional development fund. The tourism attractor destinations project, which aims to increase employment through investments in prioritised local or regional infrastructure, has received £27.7 million in ERDF investment.

Closer to home, I can speak of three projects that would not have happened without ERDF funding. The Neath Port Talbot integrated transport hub will use upwards of £5 million in European investment to create a transport modal interchange facility to promote public transport across the area. SPECIFIC, an academic and industrial consortium led by Swansea University to address the challenge of low-carbon electricity and heat by enabling buildings to generate, store and release their own energy, has secured nearly £15 million in ERDF funding and almost certainly would not exist without it. Lastly, the world-class Swansea University bay campus, which I have mentioned, is a multi-partner investment of £450 million, including almost £40 million in European regional development fund money. Those examples do not highlight the value and impact of directly funded European Commission programmes such as the Connecting Europe Facility and Horizon 2020, which are far more difficult to quantify but just as important as those funded via the UK or Welsh Governments; Horizon 2020 alone has awarded grants worth €40 million to organisations in Wales.

Post-Brexit guarantees are worryingly sparse on detail. Although the Chancellor has given a number of promises relating to any lost EU funding, those promises extend only to structural and investment fund projects signed before last year’s autumn statement. For projects signed after that, the commitment is far vaguer. In his conference speech last year, the Chancellor suggested that he would offer guarantees to projects that

“meet UK priorities and value for money criteria”,

but he has repeatedly failed to set out what those priorities and criteria will be. Surely the Chancellor of the Exchequer of Her Majesty’s Government has a responsibility to instil confidence in Welsh businesses and investments, not undermine it.

Another effect on infrastructure in Wales of the UK leaving the EU will be that the Welsh Government and local authorities have fewer sources from which to seek funding or sustainable loans. The European Investment Bank’s lending to the UK in 2015 amounted to €7.7 billion, of which two thirds, or €5.5 billion, went to infrastructure. Those figures are staggering. The thought of losing that funding leaves me cold. The Swansea University bay campus secured not only substantial ERDF funding but an EIB loan to the value of £60 million. That funding is sustainable, vital and irreplaceable.

Finally, I am concerned about a post-Brexit Wales where UK goals and priorities may be different from the EU priorities on which Wales and its Government have established plans and strategies. What will happen to the electrification of the Great Western line, the South Wales metro and the city deals?

[Nick Smith (Blaenau Gwent) (Lab)]

Does my hon. Friend agree that the Government need to confirm that our transport infrastructure investment needs will be secured for the future? Our valley lines have been a great success, but much improvement is still needed, and electrification in particular must be delivered. For that to happen, funding must be guaranteed for phase 2 of the metro system. The project will help jobs in our south-eastern valleys. The Minister must confirm that that will happen.

[Christina Rees]

I agree completely with my hon. Friend’s valuable point. I hope that is confirmed in the near future.

What will happen to the electrification of the great western line, the South Wales metro, the city deals and Swansea Bay tidal lagoon should they not be priorities for the UK Government once we have exited the European Union? The Government’s support to date for some of those projects has been questionable, as my hon. Friend the Member for Swansea East (Carolyn Harris) said, without the pressure of committing to replace any funding lost post-Brexit. They must rise to the challenge and put in place the necessary guarantees to instil confidence in our businesses, universities and investors. They must commit to replacing any funding lost by projects currently in development but not yet signed, and demonstrate to the people of Wales that we have a Government who work for everyone.

--- Later in debate ---

[Guto Bebb]

I am somewhat surprised by the hon. Gentleman’s comments, because I do not think he would argue that every single part of England has the same issues. The issues in Cornwall are very different to those in London; indeed, there is a devolved administration in London. Also, we are seeing a devolution process in the north of England and the issues facing the north of England will be very different from those in the midlands. I suspect that the Government have a responsibility to listen to arguments being made by all parts of the country. We are a Government who are listening on this issue.

I go back to the structures that have been put in place. Those structures are working. I have attended meetings with Ministers from Wales, Scotland and Northern Ireland. Unfortunately, such meetings are not currently possible, and that is a regret, but they have been constructive and for a purpose. I can assure hon. Members that views about the priorities are expressed very strongly in all parts of the United Kingdom.

The hon. Member for Cardiff South and Penarth asked whether the engagement is serious, and I argue that it is. Certainly the meetings I have attended have been robust but very worth while.

[Nick Smith]

Will the Minister give way?

[Guto Bebb]

I will of course give way to my former colleague on the Public Accounts Committee.

--- Later in debate ---

[Nick Smith]

I acknowledge that the electrification of Paddington to Cardiff is being seen through, and I hope it will be a great success. However, as the Minister knows, that project has cost a lot of money and has seen significant delays which, I think, have led to the delay in the delivery of the Cardiff to Swansea electrification. I think that the Minister will find that hard to deny. What I want from him today is a guarantee that he will ensure that the UK Government will support the Welsh Government to deliver the electrification of the valleys lines so that that is not shunted off into the middle distance and not delivered.

[Guto Bebb]

The assurance I can give is that my Department and this Government are committed to the south Wales metro scheme, which includes the need to electrify the south Wales valleys lines. The excitement that is felt about that project is not confined to south-east Wales; as a north Walian, I see it as a coherent strategy to revitalise the valleys. Cardiff is a huge success story, with jobs being created, and the south Wales metro scheme will make it so much easier to ensure that people in the valleys can be part of that. Listening to this debate will perhaps make people forget that we have success stories in Wales. I understand and fully support the view that the project is dependent on the electrification of the Great Western main line, but although there have been delays with that work, that does not prevent this investment.

The £500 million coming from Westminster for the south Wales metro scheme is on top of the settlement for the Welsh Government, and it is important to state that the investment we are seeing in infrastructure such as the railways is complemented by a significant increase in the capital funding of the Welsh Government, which has come through as a result of budget announcements, and which I hope all hon. Members welcome.

In addition, there has been significant discussion about and development of the possibility of a city deal for Swansea and the west Wales region, which is imperative, and work is being undertaken on a north Wales growth deal. What is exciting about the development of a city deal in the north Wales context is the constructive engagement between Westminster, the Welsh Government and partners on both sides of the north Wales border. There is an understanding that a growth deal, and infrastructure investment as part of that, is dependent on co-operation between the north-west of England and north Wales, and between the Welsh and UK Governments. I stress again that the relationships that are being developed as a result of the work on the city region deal in Cardiff, the Swansea city region deal and the north Wales growth deal are building confidence between the Welsh and UK Governments.