Inward Investment (Wales)

Susan Elan Jones Excerpts

Thursday 29th November 2012 Westminster Hall

[Susan Elan Jones (Clwyd South) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Rosindell. I congratulate the hon. Member for Monmouth (David T. C. Davies), the Chair of the Select Committee on Welsh Affairs, on securing this important debate, and on the work that he and the Committee have carried out on the inquiry into inward investment in Wales.

I agree with the Committee Chairman’s grave disappointment that the debate clashes with the statement on Leveson, and I hope that the topics that we are discussing will be revisited, as they are important. The hon. Gentleman reiterated eloquently the arguments that he has made in the past, together with my hon. Friend the Member for Newport East (Jessica Morden) and others, about the Severn bridge and the importance of Government transparency in that respect. There was a little bit of the knockabout partisan stuff that I do not much like; but there were social democratic tinges to the speech too—and I dare the hon. Gentleman to put that on his website. The point that it would not be desirable to compete with China on labour costs was a good start, as was the fact that he mentioned the importance of education and Government-funded infrastructure and transport. He is developing a bit more of a social democratic tinge, and that is to be welcomed.

My hon. Friend the Member for Swansea West (Geraint Davies) made an eloquent and wide-ranging speech about, among other things, the importance of electronic global market reach; economic growth under the previous Labour Government of the United Kingdom; the pitfalls of regional pay and the tragic situation of Tata steel, with the related unemployment. He also spoke eloquently about the Welsh brand and tourism, and the importance of the Dylan Thomas festival, which I too welcome.

The hon. Member for Ceredigion (Mr Williams) spoke about emerging economies and made an important point about links with universities, and working in partnership with them. I also want to add a plug for Glyndwr university, and its links to Airbus. He also spoke about the importance of tourism, and we would all welcome the fact that that is now a priority sector for the Welsh Government, and for all of us. He discussed the fact that it is important for Wales to work alongside UKTI, and the importance of infrastructure and rural broadband.

The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) was, again, a bit partisan, but I suppose that is his job, really. It was nice to see him back all suntanned from his honeymoon, and I do not want to be too partisan on this occasion. I am sure it is good to see him back with us. However, I want to make one small partisan point. The hon. Gentleman spoke of the importance of promoting Wales and of openness about how that is done, and mentioned foreign direct investment and changed attitudes to it. The tiny point I want to make is that I seem to remember the main opposition to that in the 1980s—it might have been in the ’70s too, but I am too young to remember—tended to come from the Welsh nationalists. As for the discussions on funding arrangements, Silk and the like, I am sure that we shall have that debate. I hope that it will be on the Floor of the House, where it deserves to be.

I shall try to be relatively brief, because I know that there are one or two other matters that hon. Members would like to participate in today. As the Government response to the inquiry says, the Committee’s report is comprehensive and wide-ranging. I will not respond to every one of the recommendations, but I hope to touch on the key themes. I want first to talk briefly about why inward investment is so crucial to the Welsh economy.

At the moment, at the aggregated UK level, it is difficult to see where a potential source of significant future economic growth lies, given the austerity agenda being pursued by the UK Government. Despite an Olympic-driven injection of 1% growth in the last quarter, yesterday’s—albeit slight—downward revision of previous quarters’ figures is a reminder that the Government’s economic policies have massively under-achieved. Two years ago, the Chancellor forecast growth of 4.6% but, in reality, in that time, the UK economy has grown by 0.5%. None of us can rejoice at that. Tellingly, the economy is the same size now as it was a year ago and it remains more than 3% below its pre-global financial crisis peak. The reason is clear to the Opposition: it is that Government spending is being cut too far and too fast, and household spending is being squeezed by the increased cost of living, thanks largely to the Government’s decision to increase VAT, as well as the impact of high inflation and rising energy bills.

With consumption—which accounts for around two thirds of the quarterly GDP figures—being held back, we need significant levels of investment if there is to be growth in the economy. However, the Office for Budget Responsibility has slashed its forecasts for growth in business investment over the past two years. They are down this year to a predicted 0.7%, which is a huge drop from the 8.6% predicted two years ago. We all hope that when the Chancellor gives his autumn statement next week he will give a far brighter forecast for growth in business investment for the years to come, because, with more than 700 international companies having located in Wales over the past forty years, the securing of inward investment is vital for Wales’s prosperity. I believe that the Welsh Government are acutely aware of that. In 2011-12, foreign direct investment into Wales created and safeguarded 3,706 jobs, which represents an increase of almost 5% on the previous year. For Ministers in the Welsh Government, who have had real-terms cuts to their capital budget of more than 40% imposed on them, but who are none the less tasked with offsetting the economic damage, the promotion of inward investment to Wales provides a vital economic lever.

The Committee’s report rightly acknowledges that it is down to both Governments to work together to boost inward investment, but it is also right to say that the Welsh Government’s role is pivotal. Hon. Members will know that only this week the Welsh Government presented their budget for 2013-14—a budget for jobs and growth, which reflects an unwavering commitment to attracting investment to Wales as a means of boosting the Welsh economy.

The Committee focused its investigation on three key areas that are central to inward investment, and in those vital areas highlighted by the inquiry the Welsh Government have already put in place policies that will boost inward investment. I am sure that hon. Members will welcome the fact that Ministers in Cardiff Bay have also found additional funding in those areas, as revealed in this week’s budget announcement. The areas in question, recognised by both the Welsh Government and the Committee’s inquiry, are infrastructure, promoting Wales abroad, and education and research and development.

The ambitious Wales infrastructure plan will invest about £15 billion over the next decade in capital priorities. It sets out a sectoral and targeted approach to infrastructure investment that will help to create a Wales with modern transport, IT and energy networks. It outlines for the first time in Wales a list of existing schemes that are being delivered now and schemes that are in the pipeline to be delivered but have not yet started. That approach will enable the private sector to ensure that it is well placed and adequately skilled and resourced to support the infrastructure delivery that Wales needs over the next decade. The plan also features opportunities to lever in additional funds to finance infrastructure delivery, and in this week’s final budget announcement the Finance Minister Jane Hutt revealed additional capital investment of nearly £50 million to support the plan further. The plan exemplifies the Welsh Government’s vision for attracting sustainable economic growth in Wales and should be welcomed by Members on both sides.

Of course, another massive boost to Wales’ infrastructure—and, we all hope, also to long-term levels of inward investment in Wales—is the confirmation we had in July that rail electrification to Swansea and the south Wales valleys is to go ahead. Agreement for this £350 million direct investment is a good example of the two Governments working together in the best interests of Wales. In the context of austerity measures at UK level, it is a remarkable achievement.

[Jonathan Edwards]

The hon. Lady mentioned that it was important to increase investment in infrastructure and we agree with that. The UK Government have announced an infrastructure investment plan of £30 billion, comprising £5 billion from public funds and £25 billion to be financed—different from funding—from the private sector. The Welsh Government get a Barnett consequential on the £5 billion, but not on the £25 billion. Can the hon. Lady explain what mechanisms the Welsh Government have put in place to access that £25 billion of potential investment finance?

[Susan Elan Jones]

I will be honest with the hon. Gentleman. I am not able to give him the total details and I am not prepared to flaff and speak generally, but we will provide him with an answer.

This budget will bolster Wales’s economic competitiveness, generate jobs, increase mobility and, in the context of today’s debate, strengthen Wales’s bid for future inward investment.

Another way that the Welsh Government are going about improving transport infrastructure is by continuing to forge a close relationship with Cardiff airport. Ministers are determined to work towards modernising the airport and increasing its connectivity.

The second of our Committee’s central issues is Wales’s international standing and efforts by the Welsh Government to promote Wales abroad. Since the Committee’s inquiries, there have been significant developments on this front, which I am sure that hon. Members from all parties will welcome. In July, for example, the Welsh Government officially opened their new London headquarters, based on Victoria street, focusing specifically on promoting Wales to the world, attracting greater inward investment and boosting international trade. I welcome the fact that the office will be home to permanent staff with inward investment a large part of their remit. As our First Minister, Carwyn Jones, said when unveiling the new office,

“it will create an important base for the Welsh Government, and businesses from Wales, to influence decision-makers in the foremost financial and commercial centre in the world.”

Since then, the First Minister has also revealed plans to co-locate Welsh Government staff with UKTI, to forge an even closer relationship with staff there, which is most important, and to maximise their vital contacts and resources. At the same time, the Welsh Government have placed important emphasis on trade delegations, including recently welcoming a delegation from India, led by the country’s high commission, as well as two delegations from China in September. Just two weeks ago, the Welsh Government supported their largest ever delegation to an international trade event.

[David T. C. Davies]

Although I welcome the efforts to promote Wales through trade missions, does the hon. Lady agree that it would be helpful if the Welsh Assembly Government were willing to work with the UK Government and arrange joint trade missions with Ministers in the Wales Office?

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[Susan Elan Jones]

I am sure that the Welsh Government and the Wales Office are able to discuss such initiatives. I welcome any trade missions. After graduating, I worked in Japan on a Japanese Government international programme, so I know first hand the importance of having such links and personnel, which were rather sadly downgraded by some people, in terms of international offices, and other such links. I am sure that collaborative working will be part of the Welsh Government’s and, I hope, the Wales Office’s thinking on this.

Some 70 representatives from the life sciences sector in Wales flew to Dusseldorf to take part in Medica, the world’s largest event for the medical sector, which featured more than 4,300 exhibitors. That is an excellent example of exactly the type of trade events that can create lasting relationships that can have long-term impacts on levels of inward investment.

A combination of a strong relationship with UKTI, a base for business in London and prioritising trade delegations shows that the Welsh Government get the importance of promoting Wales abroad. The same can be said for the importance of education and research and development, which are vital in their own right of course, but crucial too for the economic benefits that they can bring.

I hope that the Committee welcomes the many targeted investments that the Welsh Government have announced, particularly on the sciences, which the hon. Member for Ceredigion mentioned. Those investments include a £25 million investment in a dedicated life sciences fund, specifically designed to leverage a further £100 million in private capital for the life sciences in Wales. Science was explicitly mentioned in the report as being key to attracting inward investment. I hope that Committee members welcome this initiative.

I welcome the announcement from Education Minister, Leighton Andrews, that the Welsh Government have launched a £50 million campaign to attract the world’s greatest scientific minds to Wales. This ambitious scheme will enhance R and D in Welsh universities and market Wales’s research capability to the world’s leading scientists. In the budget announcement earlier this week, Finance Minister, Jane Hutt, also revealed support for the creation of a science and research facility led by Bangor university, to work in collaboration with Aberystwyth university. I trust that those examples of the Welsh Government’s finding innovative ways of encouraging inward investment will receive the Committee’s endorsement.

On the three areas that the Committee feels are central to increasing inward investment, the Welsh Government have put forward imaginative, innovative and—dare I say it?—patriotic policies and introduced a model that is flexible and responsive to our Welsh nation’s needs. They are actively pursuing a creative approach to encouraging inward investment, in the same way that they are pursuing an active industrial policy through enterprise zones, city regions and targeted funds for business, and pursuing an active approach to tackling long-term unemployment through Jobs Growth Wales.

On unemployment, I congratulate the Committee’s decision to launch an inquiry into the dismal failings of the Government’s Work programme and I look forward to seeing whether the Committee agrees with me that the Government should look to Jobs Growth Wales as an example, if they wish to make the work programme more effective.

The Welsh Government are doing all they can with the economic levers at their disposal and are being creative with plans to secure more inward investment. I hope that hon. Members from all parties endorse the many policies that I have mentioned this afternoon. Hon. Members will also be encouraged by how well Ministers in Cardiff bay and UK Ministers have worked together in Wales’s best interests, for example, on rail electrification.

To return to my introductory remarks, the best way that the UK Government can help Wales, not just on inward investment but on economic growth, is for the Prime Minister and the Chancellor to change course from their current austerity agenda and, like the Welsh Labour Government, introduce an active, engaged plan for jobs and growth to get our economy moving once again.