Inward Investment (Wales)

Paul Flynn Excerpts

Thursday 29th November 2012 Westminster Hall

[David T. C. Davies (Monmouth) (Con)]

I am absolutely delighted to have the opportunity, which comes around once every couple of years, to speak as Chair of the Select Committee on Welsh Affairs about an issue that we think is particularly important. Today, that subject is inward investment in Wales and the Welsh economy.

The timing of this debate is a little unfortunate. As hon. Members will know, the Leveson report is being released at this very moment, so I apologise to Lord Leveson if we keep him off tomorrow’s front pages. I accept that some Members will have even more interest in Leveson than in the Welsh Affairs Committee, so I will try to keep my speech as brief as possible to be fair to those who also find that issue of interest.

When we published our report on inward investment in Wales in February, I think that I can fairly say that it was well received and comprehensive. We took evidence from a range of witnesses in business, as well as economists and politicians. We met Ministers from the UK Government and shadow Ministers from the Welsh Assembly Government. We would, of course, have liked to meet Ministers from the Welsh Assembly Government, but the Minister with responsibility for this area did not see fit to appear before the Committee, which was a shame. As well as being a little discourteous to the Committee—I can take the insult—that risks sending out the negative message that the Welsh Assembly Government and the UK Government are not working well together, which we do not want to happen.

We recognise that there is a problem with inward investment in Wales. Looking back, we can say that the ’80s and early ’90s were something of a boom era. Despite the fact that Wales has less than 5% of the UK’s population, we were getting about 15% of inward investment projects. By the late 1990s, however, things had started to decline. Between 1998 and 2008, some 171 foreign-owned companies closed their sites in Wales, with the loss of 31,000 jobs, and now things are getting worse. A parliamentary written answer from this Monday shows that the number of inward investment projects in Wales has declined from 68 in 2009-10 to just 26 in 2011-12, despite the fact that the UK as a whole remains the No. 1 destination for foreign direct investment in Europe.

There has been a shift in FDI away from Wales and towards London and the south-east of England, and the Committee wanted to know what we could do to improve the situation. We were, of course, clear that the traditional routes for attracting investment—low labour costs, grants and help with infrastructure—can no longer be relied on. We certainly do not want to compete on labour costs with countries such as China or India. It is important that we can offer a good standard of infrastructure so that we make Wales as appealing as we can for companies that might want to come here.

Lord Green of Hurstpierpoint, the Minister for Trade and Investment, told us that countries and overseas companies weigh up certain factors systematically, as if building up a grid, before deciding where to invest. Our report focused on three of those areas, the first of which was education, which obviously is devolved to Wales. It would merit its own inquiry, if we could find a way to conduct one without causing offence to the Welsh Assembly.

[Paul Flynn (Newport West) (Lab)]

The Government’s response to recommendation after recommendation in the Committee’s report is:

“This is a matter for the Welsh Government, who may wish to respond.”

Does not the hon. Gentleman think that his report has been weakened by the Committee’s trespassing beyond its own responsibilities? The Welsh Assembly Government are likely to respond negatively. The report would have been far better and more incisive if it had concentrated on matters that are the responsibility of this Parliament.

[David T. C. Davies]

The Welsh Affairs Committee is perfectly entitled to have an interest in anything affecting Wales. Although some in the Welsh Assembly might take the view that they are not willing to talk to the UK Government about things that they consider to be their own prerogative, it is noticeable that our Committee has considered such issues as defence, which the Ministry of Defence could say was its responsibility. We have also considered broadband, which is cross-cutting and affected by both UK Government and Welsh Assembly Government policy. We consider anything. I am proud to be Welsh and proud to be British, as hon. Members can see from my cufflinks. I make no apology for the fact that the Welsh Affairs Committee would be perfectly happy to consider anything affecting Wales.

[Paul Flynn]

Throughout the long history of Denbighshire county council, its longest ever meeting, which went on beyond midnight, was to decide the council’s policy on the war in Vietnam. That might have seemed to be a sensible thing to do, but I do not think that it had a great effect on world opinion or the conduct of the United States at that time. Does the hon. Gentleman think that his Committee is likely to end up in a position where it takes up any subject, whether or not it has any influence on or knowledge of it?

[David T. C. Davies]

First, although I was a mere boy at the time, I seem to remember that the hon. Gentleman was either a member of, or involved in, Newport council at the time when I lived there, and that he used to help with discussions of whether Wales should be a nuclear-free zone, so perhaps he has experience of long discussions about things over which he is likely to have little influence. Secondly, inward investment is clearly a cross-cutting issue that is affected by both Welsh Assembly and UK Government policy. I do not want this sitting to go on for as long as that meeting of Denbighshire county council—it is not a record that I am hoping to beat—so I would like to continue my speech.

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[Paul Flynn]

rose—

[David T. C. Davies]

Which I shall do after I have given way to the hon. Gentleman for the third time.

[Paul Flynn]

The hon. Gentleman is being very generous. The nuclear-free Wales policy was a remarkable united expression by every county council in Wales—there were eight in 1981. “Nuclear-free” was about nuclear power, not nuclear weapons. Every county council passed an identical resolution saying that it did not want nuclear power stations in Wales but, sadly, the then Government defied that call.

[David T. C. Davies]

How times have changed, as Labour councils now seem to be very supportive of nuclear weapons and nuclear power stations. In 1981, there were no Conservative-led councils, but today there is one in my constituency, so things change for the better.

Returning to education, however, things are not changing for the better. Hon. Members will be aware of the recent OECD programme for international student assessment—PISA—report on education across numerous developed countries. Wales was not only below average for the developed world in subjects such as maths and science, but below average for the whole United Kingdom. The Committee hopes that the Welsh Assembly Government will address that situation. Speaking personally—to take off my Chair’s hat for a moment—I do not think that it will be addressed by setting up a completely separate examination system in Wales, which the Assembly is considering.

We considered the role of further and higher education, and universities are becoming increasingly prominent in investor decisions. We believe that although a lot of good work is going on between universities and industry, a great deal more can be done.

There are numerous studies about the economic benefits of good and efficient transport links. We should be concerned about the current quality of transport links in mid and north Wales, and about connectivity with the rest of Wales. We are exploring those issues in more detail in a current inquiry and our report will be published shortly.

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

It is a pleasure, Mr Bone, to serve under the chairmanship of the star strike bowler of the parliamentary cricket team. I had not intended to speak, so I will keep my speech brief. I will be probably more disjointed than I usually am in my parliamentary contributions.

The report is hugely important—I congratulate the Chair of the Welsh Affairs Committee—and has been well-received, especially by the Welsh media, who gave it significant coverage. As we know, economic growth is driven by four interconnected factors, the first of which is household expenditure, which accounts for 62% of GDP growth in the UK. That is perhaps testament to overdependence on that specific component during the Labour years. The second factor is Government expenditure. We are witnessing more than £80 billion of cuts during the current comprehensive spending review, which is a major head wind for the course of the British state. The third and fourth factors are exports and business investment, in which foreign direct investment—FDI—plays a huge part. The report was very timely.

At one time, Wales was a world leader, or definitely a leader within the UK, in generating FDI. Behind my family home in Capel Hendre is an enormous industrial estate, with companies from Korea, Japan, the US and, indeed, all over the world, which is testament to its success. There have been concerns that we are over-reliant on foreign direct investment and not sufficiently promoting indigenous businesses, but there is now growing agreement that the pendulum has swung too far the other way. Unfortunately, Wales is now among the worse-performing constituent parts of the UK in terms of FDI.

We are living in an age of reductions in Government expenditure and of contraction in household expenditure. Recently, the consumer confidence index was at minus 30 —the lowest it has ever been—showing the huge economic head winds that are being faced. The hon. Member for Swansea West (Geraint Davies) wanted to appoint me as an exponent of austerity, but I assure him that I do not support the experiment of cutting Government expenditure. That policy was set by the Chancellor, so concentrating on the promotion of FDI in Wales is key to our economic well-being, and it is the one element that can help to stimulate the other two components—business investment and exports.

I want to highlight some of the report’s important recommendations. First, we need to work closely with UK Trade and Investment to help promote Wales as a destination for FDI, and I agree with comments made by Members from all parts of the Chamber. I welcome the announcement, following our report, that UKTI has based an official in Wales. We were the only component part of the United Kingdom not to have such a representative, so I am glad that that has been rectified.

I want the Department for Business, Innovation and Skills to instruct UKTI to pursue a similar path to Germany Trade and Invest, which has a remit to set specific targets for directing investment to the poorest parts of the state. That policy does not exist in the UK, but it would help to drive FDI into those areas, such as Wales, that are underperforming. Indeed, we could learn a lot from the example of German economic policy, which has enabled Germany to address huge wealth inequalities following reunification. It is incredible that, following 50 or 60 years of communism, its wealth levels are far more equal than the UK’s, but I shall not go down that road.

The signature recommendation in the report and the one most trailed in the press was the need to reuse the Welsh Development Agency brand. As a Plaid Cymru politician, I should take some credit for the original creation of the WDA, because it was the Plaid Cymru economic commission in the 1960s and 1970s—under Dafydd Wigley, Phil Williams and Eurfyl ap Gwilym—that first had the idea of the dedicated economic investment arm that later morphed into the WDA. I am not talking about reconstituting the WDA as it was when it was swallowed by the Welsh Government, but about reusing the brand. It is a global brand that, to this day, everybody recognises. The reality is that the successor bodies set up by the Welsh Government have nothing near the recognition of the WDA, so I want them urgently to reuse the brand.

[Paul Flynn]

I admire the skill of the Select Committee in choosing a day for this debate when there is no other subject to distract the media. One abiding impression of the report is that it is part of the begging bowl psychology in which we have one dominant partner in a relationship with another subservient partner, and we know which one is which. As it has come from the party, would not a more accurate title for this report have been, “One Hundred Shades of Blue”?