Welsh Grand Committee

For the last 13 years the people of Wales have had to put up with the ignominy of four Secretaries of State who were MPs from Wales – yes MPs from Wales – in the Wales Office – can you credit it? What a relief that Gwydyr House has now been restored to its former Tory glory, continuing the long line of Conservative MPs representing English constituencies which goes back to 1987.

Some might say not so much a new Secretary of State for Wales as new Secretary of State for Chesham and Amersham.

And this despite her Conservative Welsh back benchers who are bristling with talent. Never has the Welsh Grand Committee witnessed a more brilliant bunch of Tory boyos.

And why, in contrast to Scotland is there no Liberal Democrat Minister in the Wales Office? Despite such a talented a threesome: Cardiff Central’s young Mum to be, Ceredigion’s scourge of Plaid Cymru and Hon member for Brecon & Radnorshire who looks absolutely ecstatic at being coalition with Tories.

Even more so since on BBC Wales last Tuesday he proclaimed the VAT rise the best thing since sliced bread having denounced it on BBC Wales two days previously as “a very regressive tax that falls most heavily on the poorest in society” which he could not possibly support. A new Liberal Democrat dictum: two days is a very, very long time in politics. In fact after Brecon & Radnorshire has now done a double volte face because he popped up on Monday alongside Ceredigion with a motion condemning VAT again.

And then there was the excruciating sight of Welsh Liberal leader Kirsty Williams meeting her new coalition partner Rt Hon Lady on the steps of the Senedd. She was like a bride who suddenly discovers to her horror the wrong person waiting for her with the ring. But all guests there, photographers snapping away, presents stacked up, the Vicar expectant. So what does she do? Goes through with the wedding ceremony smiling rigidly like the bride of Frankenstein. Her performance is a vintage hit on You Tube – I recommend it as a cure for coalition insomnia.

As for the Queens Speech, it’s clear that they want to pack the Lords and fix the Commons. She has the dubious distinction of being the first Secretary of State ever – the first Secretary of State ever – to advocate a reduced voice for Wales in Parliament, so increasing the voice of her Buckinghamshire constituents relative to our Welsh constituents.

Drawing up new boundaries which take no account of Wales’ population sparsity, or the geographic remoteness of communities in rural and Valley communities. Slashing the number of elected Welsh MPs from 40 to 30 and riding roughshod over criteria by which Parliament first ensured in 1949 that Wales never had fewer than 35 MPs.

Subsequent independent Boundary Commissions gradually increased this to 40 seats. She is spearheading a deliberate, calculated attack on Wales’ influence in Parliament. Outrageous behaviour for a Secretary of State whose main job should be to stand up for Wales not to attack our citizens’ democratic rights.

In fact, yet again, the Tories are turning Wales into the great ignored nation because, as the First Minister Carwyn Jones has said, there is no longer a strong voice for Wales around the Cabinet table. Scotland has got a generous reform of the Barnett Formula through legislation on the Calman Commission reforms and on top of this the Fossil Fuel Levy. But nothing whatsoever from her Government for Wales: not a mention of the Holtham Commission reforms. She could not even persuade her new Tory Liberal Cabinet colleagues to honour the agreement I negotiated with the Treasury to protect Wales. Instead of taking forward the Holtham proposals, she has broken that pre-election promise and dumped them in the long grass. A weak Secretary of State doing what Tories always do best of all: weakening Wales.

And only yesterday she had to make a humiliating climb down on the Housing LCO. She and her Minister blocked it in the pre-election wash-up negotiations but Carwyn Jones has now forced her to take it through. And a good thing too for the homeless and thousands in Wales in desperate need of affordable housing.

On the budget, the government says the richest will bear the brunt. That is simply not true. Many on low and modest incomes will feel the pain much more.

The real scandal of the budget is that the poorest will be hit the worst. I expect nothing less from Tories. But Liberal Democrats should hang their heads in shame. The Party of Lloyd George, who first established the state pension in 1909, and William Beveridge who in 1942 paved the way for the welfare state, has abandoned all it stood for.

The Observer reported a study by leading economists that finds poorest families in Wales will lose 21.7 per cent of household income. That’s over a fifth of their income. Even worse, they are being hit fully six times harder than richest. This was the first such study to take account of impact, not just of tax and benefit changes, but of savage cuts in public spending.

Not only will pensioners pay more in VAT, they were shamefully excluded from the much vaunted £1000 rise in the basic tax threshold. A double tax attack on Welsh pensioners.

Increasing VAT to 20% will affect everyone, most of all pensioners and those in poverty. As the Financial Times has said, areas like Wales that rely most on the public sector will be hit hardest by the deep cuts announced to public spending.

Worse still, these big cuts are based upon a big lie: that the public finances are so terrible, the cuts must be faster and deeper than Labour’s very tough deficit reduction plan which would have halved borrowing within four years. The prime Minister and Chancellor have been deliberately scaring the public, with the Liberal Deputy PM and Business secretary joining in.

But, as their own Office for Budget Responsibility said two weeks ago, the situation they inherited is actually better than was forecast as recently as Labour’s Budget in March!

Borrowing is £9 billion lower this year and £22 billion lower over the coming four years. Growth is higher and unemployment is lower. Business bankruptcies and home repossessions are half the rate of the 1980s and 1990s Tory recessions. All because of Labour’s government action and investment to support jobs, businesses and struggling home owners which has left Britain much better placed than America or the rest of Europe to recover from the worst global recession for eighty years.

These brutal cuts are ideological, not economic. The new ConDem Government is not cutting savagely because it needs to, it is cutting savagely because it wants to.

One thing has certainly changed since Labour left office: the Eurozone countries – especially Greece, and now Spain and Portugal – are today in real difficulty. Without Labour’s progressive influence, fiscal conservatism is now dominant in Europe, with huge cuts in public investment and jobs on the way. As President Obama has warned, this endangers the world recovery. It also means a downturn in the very European market where the vast majority of our trade takes place.

So this is precisely the moment not to cut public spending savagely, because it will put at risk the still fragile British recovery. Cutting deeper and faster repeats the mistakes of the 1930s, 1980s and 1990s Tory Governments.

We are coming out of the recession but our economy and the economies of many countries around the world have not fully recovered. The recovery is fragile and could easily be derailed.

Only governments can step into the breach during such difficult times.

Cut off that support and the risk is palpable.

The private sector isn’t yet robust enough to replace government investment. Nor is it getting anything like the support delivered by Labour.

John Maynard Keynes – a signed up Liberal – will be turning in his grave, not just at this damaging folly, but at the manner in which the Liberal Democrats have breathtakingly somersaulted, trading tens of thousands of jobs that will be lost in Wales (hundreds of thousands across Britain) for their own jobs in Government.

The Deputy Prime Minister, Welsh Liberal Democrat leader Kirsty Williams, and even the once-saintly Business Secretary, are now arguing the precise opposite of what they did in the election campaign just a few weeks ago. Big cuts based upon a big lie – a real tragedy for Wales.

Because there are two big challenges facing Wales: first how to secure jobs and growth. Second how to get borrowing down in a way that is fair to everyone.

The first budget from the new government has failed the fairness test, going back to the same old right wing Tory agenda:

attacking pensioners;
hitting people on low incomes;
causing unemployment to rocket;
making our hardest working families pay the price.

The only difference is this time it’s defended to the hilt by the Liberal Democrats.

What we have from the Con Dem government is a strategy for cuts.

But where was the strategy for jobs and growth, the lifeblood of this country?

Growth is essential to secure a future for ourselves and for our children.

Without growth Wales will be condemned to years of decline.

After record levels of employment and prosperity, falling unemployment and falling numbers of incapacity benefit claimants under Labour, Wales will be returned to its traditional Tory place: bumping along the bottom, with higher unemployment, lower incomes, poorer prospects.

That is not where Wales needs to be. That’s no future for my three Welsh born grandchildren. Nor is it any future for the 240,000 Welsh men and women on Disability living allowance now facing brutal cuts.

And now the Tories with the help of the Liberals plan to punish hundreds of thousands on incapacity and other benefits. We had a benefits regime that was tough but fair. They are pledged to one that is punitive and unfair.

Wales has been through a difficult time as has every other country in the world.

But the Government is repeating the mistakes of the past when cuts were made without any regard to the consequences.

We have no argument with over the need to reduce our borrowing.

That is why Labour set out a plan to halve the deficit over four years, cutting borrowing by £70 billion – a huge reduction involving very difficult decisions and cuts.

What we were not prepared to do – and they obviously are – was top this up with a further £32 billion of spending cuts and a further £8 billion of tax rises over and above Labour’s plans.

The Tories, using the LibDems for cover, have made the wrong choice. They are gambling with the recovery and it won’t be bankers, or the many millionaires in this Cabinet, who suffer. It will be the people of Wales who pay the price.

The Tories, using the LibDems for cover, accept that unemployment is a price worth paying.

Listen to their new independent Office for Budget Responsibility. It predicts that as a result of the budget employment will be down by 100,000 with lower growth this year and next. The scandalous abolition of the Future Jobs Fund means the 11000 unemployed Welsh young people who have already benefited, and a further 6,000 who were due to benefit, will be back on the dole.

The former Monetary Policy Committee member David Blanchflower predicts 250k extra young on dole next year following FJF cuts and other Budget measures. That suggests up to 20,000 Welsh 18 to 24 year olds condemned as young people in Wales were in the Tory 1980s and 1990s to generational joblessness.

Many tens of thousands of Welsh jobs will be lost in both the public and private sectors, 50,000 being one estimate. That could well prove an underestimate according to a treasury assessment that 1.3 million jobs will be lost across Britain as a result of the Budget over next five years.

To reduce government borrowing, Labour chose to raise national insurance contributions rather than increase VAT. Now we have both.

Only weeks ago the Tories said the NI rise was a ‘jobs tax’. Last week we found that they are increasing the tax on employees.

And they have put up VAT to 20%.

Only weeks ago David Cameron said it was a tax rise we wouldn’t see.

And the Liberal Democrats condemned the prospect as a dire draconian tax bombshell.

Now they will try to force it onto the statute book, a fundamental breach of trust with voters.

This is the third time in a row that a new Tory administration has raised VAT despite denying any plans to do so – Thatcher in 1979, Major in 1991 and Prime Minister in 2010. What a hat trick.

And while pensioners were exempt from NI they are not exempt from VAT.

They say we are all in this together. But many people on low and middle incomes will see their earnings cut.

Child benefit frozen for the next three years for over 7 million families; tax credits reduced for families earning just over £15,000 and scrapped for families earning just over £30,000 in two years time. The Rt Hon Lady may remember specifically denying to me this would happen on our election TV debates. Yet another broken promise and one she also specifically denied on those same TV debates: hundreds of Welsh police and community police support officers are for the chop.

Yes there was a boost to child tax credit. But this was more than offset by housing benefit cuts, scrapping of maternity and pregnancy grants, along with other benefits targeted to support children.

And the Con Dem government has also launched a full-scale war on public sector pensions.

Now of course reform was needed – indeed Labour introduced radical reforms: postponing the retirement age and increasing public employee pension contributions, closing old schemes and starting new ones. All changes negotiated with the trade unions. But the orchestrated Tory Lib Dem assault on public pensions heralds a race to the bottom which will leave a huge burden on future taxpayers coping with pensioner poverty.

For every high earning public service pensioner who provokes headlines in the Tory media there are thousands and thousands on low pensions.

For example the average pension for female NHS worker is £5000; the median rate is even lower: half women NHS workers are on a pension of less than £3500.

For companies there is a reduction in headline tax. But allowances which make all the difference to investment and future jobs growth have been cut.

We shouldn’t be surprised. Just two weeks ago the new government scrapped our plans to extend a loan to Sheffield Forgemasters, and the promise of high quality jobs.

And Tories and LibDems should not insult our intelligence by trotting out the line that they can renege on their election promises because the books were worse than they thought. That is also simply not true.

The Tories and Liberals are constantly scaremongering, comparing us with other countries like Greece. That is ridiculous. We are a large developed economy. No-one believes our positions are anything like comparable.

The truth of the matter is that the Tories, with LibDem help, have done what Tories always do: cut, cut and cut again until public services for all give way to private profits for the few. This budget is a Lib Dem summer sell out. It turns the Lib Dem orange book into a Tory blueprint.

Where Britain needed a budget to give the green light to growth, instead it switched all the signals to stop.

Instead of driving the economy forward the budget has engaged reverse thrust.

Because there is no room left for interest rate cuts, this budget increases the danger of a double dip recession.

A double dip recession that could take Wales back to the dark misery of the 1980s and 1990s, when whole generations of young and old condemned to suffer.

It’s an outrage and I warn the Rt Hon lady: the people of Wales will not take this lying down. We will fight back.

Dissolution of Parliament Motion

The Secretary of State for Wales (Mr. Peter Hain): I thank the hon. Member for Moray (Angus Robertson) for praising the Prime Minister—we can do much more of that in the debate. I also thank the leader of Plaid Cymru for his earlier welcome of my reinstatement as Secretary of State—I am grateful. I apologise to him and the House for having to rush off after I have spoken to get my seals of office. I have to stand the hon. Gentleman up for the Queen.

I shall respond to the hon. Member for Moray shortly and urge hon. Members to reject the motion, which calls for a dissolution of Parliament. However, first, I want to ask why the motion is not in the name of the Leader of the Opposition. He calls for an immediate general election every time he gets out of bed and every time he goes on television. He has said virtually nothing for the past few weeks, except to demand an early election. So why does not he table the motion instead of trooping dutifully behind the nationalists? Is he just playing to the media gallery, as usual, because he knows that the House of Commons will not back him? Is it a case of bravery before the cameras, cowardice before Parliament?

Madam Deputy Speaker: Order. Perhaps the right hon. Gentleman will reconsider and withdraw that remark.

Mr. Hain: I happily do so—it was said in jest.

The leader of the Conservative party is allowing the nationalists to do his work for him.

Sir Robert Smith (West Aberdeenshire and Kincardine) (LD): Perhaps the Leader of the Opposition has followed the example of the Prime Minister. We have a debate in which the Prime Minister could have explained why he does not want an election, yet he has not bothered to turn up. He has sent a Minister who is not available for the whole debate. When we have a three-hour debate in the Chamber, the least the Government can do is find a Minister who can be here for it.

Mr. Hain: Where is the leader of the Liberal Democrats? Where is the leader of the Conservative party? I see that the leader of the SNP has dutifully travelled down to do the Tories’ work for them, as he so often does. Plaid Cymru and the SNP are the Tories’ little helpers. In 1979, the SNP voted to destroy a Labour Government and usher in 18 years of miserable Tory rule. In the European elections, voting Plaid Cymru allowed the Tories to top the poll in Wales—albeit on a pitiful vote of just over 6 per cent. of the electorate. Voting SNP will allow the Tories to get in at Westminster.

Mr. Elfyn Llwyd (Meirionnydd Nant Conwy) (PC): Not that it matters a great deal—although the right hon. Gentleman has apologised once to the House, a few seconds ago—but just to be accurate, he said that Plaid Cymru voted to bring down the Labour Government. We did not.

Mr. Hain: Actually, I did not say that at all. I said that the SNP voted with the Tories to bring down the Government in 1979. However, let me remind the hon. Gentleman and the House that we remember well that Plaid Cymru came to the rescue of the besieged Conservative Government under John Major, by doing a grubby deal in 1993.

Mr. Simon Burns (West Chelmsford) (Con): Talking about grubby deals, does the right hon. Gentleman remember that in 1979 the Labour Government did a grubby deal with Plaid Cymru to secure their votes and to try to cling to office?

Mr. Hain: Actually, it was an honourable deal, concerning quarrymen in north Wales as I recall. We were happy to do what we did, which was in their interests.

Pete Wishart (Perth and North Perthshire) (SNP): Will the Secretary of State give way?

Mr. Hain: In a moment. The SNP—the hon. Gentleman’s party—has a history of seeking to inflict a Tory Government on Scotland. It did that in 1979 and it is trying to do it again now. The SNP’s real agenda is not about an election; it is about wanting to get a Tory Government in Britain to undermine Scotland’s link with the rest of Britain. The SNP would love to have a Tory Government in Westminster, inflicting mass unemployment, education cuts and hospital closures in Scotland again, so that it could try to ride a wave of revulsion towards independence for Scotland.

Pete Wishart: I agree with the Secretary of State: the last thing that Scotland needs is a Conservative Government. We remember all too well the scorched earth policies and being the testing ground for the poll tax, but does he not agree that the reason that we will get a Conservative Government in Scotland is the failure and futility of his Labour Government?

Mr. Hain: Is the hon. Gentleman saying, then, that he prefers a Labour Government? [ Interruption. ] That is very interesting. So, as far as he is concerned, he does not mind a Conservative Government in Westminster.

Several hon. Members rose —

Mr. Hain: Let me make some progress. We now have the hon. Gentleman on the record as being indifferent to a Tory Government, and the people of Scotland will note that. People who back the nationalists get the Tories on their coat tails, just as the Tories are on the nationalists’ coat tails in voting for today’s motion. That is what the nationalists are: tartan Tories in Scotland and daffodil Tories in Westminster.

Hywel Williams (Caernarfon) (PC) rose—

Mr. Hain: I give way to a daffodil Tory in Westminster.

Hywel Williams: I thank the Secretary of State for giving way, but we need to respect history. We had Tory Governments throughout the ’80s and ’90s not because of the actions of the nationalist parties, but because the Labour party lost the election—and then lost and lost and lost. That is the Labour party’s responsibility, not ours.

Mr. Hain: I have a lot of respect for the hon. Gentleman, but it was his nationalist colleagues in Scotland who helped to bring down the Labour Government, which paved the way for a Tory Government.

Mr. Jim McGovern (Dundee, West) (Lab): I agree with the Secretary of State’s comments about what happened in 1979. The people of Scotland have good memories and they will never forgive the separatists of the SNP for what happened in 1979, which was an unmitigated disaster for the people of Scotland. I am sure that the Secretary of State will remember that, following 1979, the SNP—the separatists—were dubbed the tartan Tories by the people of Scotland. Is he also aware that, given that the official Opposition are totally devoid of any policies at the moment, the people of Scotland currently dub the separatists of the SNP the political wing of the Conservative and Unionist party?

Mr. Hain: My hon. Friend puts the case very eloquently, and I have to agree with him. Here are the tartan Tories, at it again today, siding with the Conservatives to achieve their objectives. People who back the nationalists get the Tories on their coat tails.

Adam Price (Carmarthen, East and Dinefwr) (PC): How can the Secretary of State have the gall to accuse our parties of being Tories when on virtually every major issue of the past 12 years—whether the Iraq war or the privatisation of Royal Mail—our parties have been to the left of his?

Mr. Hain: What about the minimum wage— [ Interruption. ]

Madam Deputy Speaker: Order. Members have a right to be heard.

Mr. Hain: What about the statutory minimum wage? I do not remember massive support for that from the nationalists. To dissolve Parliament now would be to walk away from the necessity for the reform that voters are demanding, as the hon. Member for Moray rightly said, and that we are delivering in the form set out by the Prime Minister earlier today. I heard the hon. Gentleman waxing lyrical—and being very persuasive—about the need for democratic reform. Virtually every one of the proposals that he advocated was enunciated from this Dispatch Box by the Prime Minister a few hours ago. To dissolve Parliament now would be to turn our backs on the British people in their time of economic need and insecurity. Neither of the two great challenges that we face—the political challenge and the economic challenge—would be solved by an election. Playing with parliamentary motions might be a priority for Opposition parties. Cleaning up politics and getting the country back to work is Labour’s priority.

Mr. Richard Shepherd (Aldridge-Brownhills) (Con): Does the Secretary of State not believe that a Labour victory in a general election would clearly reinforce the strength and competence of the Government to address the issues that confront this nation? Is that not a case for holding an election now?

Mr. Hain: When the time comes to call an election, we will indeed get a renewed mandate to take the country forward and to meet the challenges of the future. That will be the choice that is put before the British people at that point. They would not forgive us, however, for abandoning the job of implementing parliamentary reform and economic recovery now. They want the Government to sort things out; they want us to do it quickly, and then, and only then, to call a general election. There will be one soon enough—within a year—and only then will it be right to go to the country and ask who should take us forward to the future, once we have addressed the pressing concerns of today.

Stewart Hosie (Dundee, East) (SNP): The Secretary of State says that these things need to be done quickly, and I entirely agree with him. So why, after 12 years, have we still not got a fully elected House of Lords and a proper democratic system for this Chamber? This is expediency on the part of the Government; they are not taking decisive action. Their argument is facile beyond belief.

Mr. Hain: The reason that we have not been able to get our reform through the House of Lords is that the House of Lords blocked it. Labour has only about 30 per cent. of the votes in the House of Lords, and the Conservative party—despite now advocating a policy of an elected second Chamber—cannot deliver its own peers in the House of Lords in such a vote. Sooner rather than later, however, we will put that question to the House of Lords, and we will hope to carry the House with us in getting full reform for a democratic second Chamber.

Meanwhile, there is a lot to do. Of course the European elections were terrible for the Labour party. But, far more significantly, they were an alarm call for all the parties, and for parliamentary democracy itself. For every party, a low turnout at elections is the clearest sign that the British people are not engaged with the political process. That is our fault, not theirs. We seem obsessed with procedure and tribal party politics—as we can see this afternoon—and now the public also think that MPs are all in it for our own ends.

If this motion were carried and Parliament were dissolved, all that the poll would amount to would be another referendum on MPs’ expenses. The low turnout and the rising support for fringe and extreme parties show us one thing: that people used their vote last Thursday to protest, not on the finer points of European policy, but on the story of the day—indeed, the story of every single one of the past 30 days: MPs’ expenses.

Mr. Donohoe: I thank the Secretary of State for giving way on a point on which the hon. Member for Moray (Angus Robertson) would not give way. I want to ask my right hon. Friend a simple question. Does he honestly believe that, if the motion were successful and there were to be a general election in the coming weeks, the question of Members’ expenses would go away? Would it not stay with us for the following four years as well? Would not The Daily Telegraph and all the other newspapers revisit the issue and find some other reason to print the same story?

Mr. Hain: I could not agree more, which is why we need to lance the boil now, and why we need this Parliament, on a cross-party basis, to sort this out here and now. Then, within a year, we can have an election to decide who should take the country forward—not how we should reform parliamentary expenses, because that will have been done, but who should take us forward to meet the big challenges of the global economic crisis, of climate change and all the other issues before us.

Lembit Öpik: Does the right hon. Gentleman agree that what has effectively happened, in summary, is that the general public and the media have become obsessed with the process of politics rather than the outcomes that we are meant to create, part of which is our own fault? The people of Montgomeryshire are less interested in process than in getting out of this recession, so if we are not to have an election, will he explain how he envisages the Government responding in the months ahead to the need of the citizens of Montgomeryshire and across the country for outcomes to make their lives better, their jobs more secure and to reduce the sort of social tensions that led to the reaction we saw in the European elections last week?

Mr. Hain: I could not agree more with the hon. Gentleman that the media are far too obsessed, almost to the exclusion of all else, with process. It is process, process, process rather than substance, substance, substance. That is why we will carry on with delivering our policies to get the housing market going again, to build more social housing, to tackle the lack of confidence in business and to ensure that business is supported so that we can recover from this economic crisis brought about by the global financial collapse and move the country forward. Then there will be a choice—a very clear choice—at the next general election.

We do not need a referendum on expenses because we have just had one. We were all given a real kicking by the voters and we understand the message: “Clean up, shape up, get on with the business of Government and come back to us when the problem is fixed”. Where the Opposition parties posture, we deliver. We are determined to take the necessary action, not to walk away.

Just imagine what might happen to the economy if Parliament were dissolved and we had an election. In the middle of probably the worst financial crisis the world has faced in living memory, Britain would face weeks and weeks of instability and uncertainty—just when there are reports of rising consumer confidence, just when business surveys show the pace of decline is slowing, just when mortgage approvals have risen for the third month in a row and just when the poison infecting our banks has been stemmed. Why, just at this critical moment when the global economy is still volatile, do the nationalists want to trigger instability in the markets and in the British economy?

Let us imagine for a moment pursuing this nationalist-Tory alternative. We dissolve Parliament, then spend the next three weeks fighting each other rather than the global crisis, and the nationalists do not have a clue what to do about it. The hon. Member for Carmarthen, East and Dinefwr (Adam Price), who rather fancies himself as an economist, praised Iceland as an inspirational model. No sooner had he done so than its economy imploded, while his other small country model, Ireland, has sadly had its own serious difficulties, yet Plaid lauded both Iceland and Ireland as an arc of prosperity.

As for the Tories, the real reason they want an election now is that they cannot go on for ever dodging the questions. They have no policies at all except for multi-billion pound cuts in public investment.

Several hon. Members rose —

Mr. Hain: I will give way in a few moments.

It is good to see that the right hon. Member for Richmond, Yorks (Mr. Hague) has found time from his millionaire speaking and consultancy contracts to be with us today. He has a vivacious Welsh wife, but sadly she has not managed to educate him politically. He opposed the minimum wage, which has benefited millions of workers throughout Britain. He opposed the social chapter, referring to

“minimum wages, social chapters and all the other job-destroying nonsense”.—[ Official Report, 20 January 1997; Vol. 288, c. 606.]

He said that the National Assembly for Wales would be

“nothing more than a talking shop and a terrible waste of money”.

Does he still hold those views? Should he not now apologise to the shadow Welsh Secretary for landing her right in it?

When the right hon. Gentleman was Secretary of State for Wales, at least he learned the national anthem—indeed, his rehearsing it led to him marrying his private secretary—but he blocked billions of pounds of objective 1 and convergence funding for Wales, which a Labour Government subsequently delivered. He is now part of an Opposition who want to implement billion-pound cuts that would decimate those very European programmes right across Wales.

Adam Price: The Secretary of State’s speech is another good argument for an early dissolution. He is obviously out of practice. If Plaid Cymru has nothing to contribute in terms of the economic crisis, why did his party agree to form a coalition with us, and why is the leader of my party, the Minister for the Economy and Transport, coming up with the ProAct wage subsidy scheme, which the Secretary of State has himself praised and described as an innovative scheme that should be copied here?

Mr. Hain: If we are talking politics and government in Cardiff Bay as opposed to politics and government in the House of Commons, why did the hon. Gentleman’s party chase after the Conservatives in the desperate search for a coalition before Labour helped it out and got it into government?

On the “Today” programme this morning, the hon. Member for South Cambridgeshire (Mr. Lansley), the shadow Secretary of State for Health, let slip that

“that does mean over three years after 2011 a 10 per cent. reduction in the departmental expenditure limits for other departments. It is a very tough spending requirement.”

Yes, the demand from the Tories is very tough. A 10 per cent. cut would be an utter disaster for housing policing, business support, defence and many other public services. A 10 per cent. cut would amount to cuts of £50 billion across the United Kingdom, £600 million in Wales, and £1.2 billion in Scotland.

The Tory mask is slipping. The Tories want people to vote soon, before the truth is out. They have no positive solutions to the financial crisis, just opportunist spin on the economy today followed by savage cuts to public services tomorrow—cuts made almost with relish, gleefully. The Tories would use the financial crisis as an excuse to do what they have always wanted to do: cut, cut and cut again.

Stewart Hosie: The Secretary of State is absolutely right: making savage cuts in the teeth of a recession is the wrong thing to do. He will therefore criticise his own Chancellor and the Treasury for the £500 million worth of cuts that will be heading Scotland’s way next year in the teeth of a recession.

Mr. Hain: Is this not curious? The Scottish Government have never had more money than they have now. Their budget, like that of the Welsh Assembly Government, has more than doubled since we came to power in 1997.

What is the real nationalist agenda? Why would the nationalists dissolve this Parliament today? It would not just be for the purpose of an immediate election; they would dissolve this Parliament for ever. [Hon. Members: “Hear, hear!” There we are. They are cheering the idea. If they were frank, they would admit that they would break up the United Kingdom, cutting off Wales and Scotland from the main markets, population centres, wealth and international influence of the United Kingdom.

Mr. Alex Salmond (Banff and Buchan) (SNP): He is talking sense at last.

Mr. Hain: That is the sense that the people of Scotland will reject: cutting Scotland’s links with the United Kingdom, just as Plaid Cymru would cut Wales off from the great benefits of sheltering under the umbrella of the United Kingdom and making us all stronger together.

Mr. Salmond: Given that the Secretary of State’s colleagues in the Labour party in Scotland have been deploying these arguments for years—and, I am sure, deployed them in the European election campaign—to what does he attribute the judgment of the people of Scotland in increasing the SNP vote by 10 per cent. in mid-term, and last week’s resounding endorsement of the SNP Government in Scotland?

Mr. Hain: The right hon. Gentleman speaks of a resounding endorsement, but I believe that the SNP received less than a third of the vote on a tiny turnout. Labour voters, for reasons that I have explained, stayed at home in their hundreds of thousands.

Mrs. Madeleine Moon (Bridgend) (Lab): Does my right hon. Friend agree that people listening to this debate will be appalled by the petty discussions about which party’s votes have increased by what percentage? What concerns the people of this country, and certainly the people of Wales— [Interruption.]

Madam Deputy Speaker: Order.

Mrs. Moon: Thank you, Madam Deputy Speaker.

What concerns the people of Wales and the people of this country is the memory of being told to get on their bikes and find work—of “hunt the job”. They remember money being sent from Wales to Westminster when it could have been invested in Wales. They remember schools falling apart, and education waiting lists. That is what people want us to discuss here, not whether another party has increased its voting share by 1 per cent. Nobody cares about that; they care about their lives.

Mr. Hain: My hon. Friend makes that point extremely persuasively, and it reminds me that when the right hon. Member for Richmond, Yorks was Secretary of State for Wales he endorsed the policy of his predecessor, the right hon. Member for Wokingham (Mr. Redwood), in sending money back from Wales to the Treasury, which we then had to reverse by more than doubling the budget for Wales since we came to power. If the nationalists were successful in wrenching Wales and Scotland from the rest of the United Kingdom, that would leave Wales with a £9 billion deficit in public finances, and the figure for Scotland would be about £10 billion.

The SNP Administration at Holyrood are propped up by the Tories. Tory votes in the Scottish Parliament supported the SNP’s budget of cuts, and the quid pro quo is that the SNP in Westminster does the Tories’ bidding. People in Scotland whose communities still bear the scars of Thatcherism did not thank the SNP in 1979, and they will not do so now.

Let me make this plain: the Tories and the nationalists would turn their backs on the British people and walk away together. They would dissolve this Parliament because they hope it would suit their short-term political ends. Only Labour will stay the course to do the hard work, to reform, and to give real help to the British people. They can dissolve if they want to; this Government are not for dissolving. We are standing firm, and I urge the House to reject the motion.

Welsh Day Debate

The Secretary of State for Wales (Mr. Peter Hain): I beg to move, That this House has considered the matter of Welsh Affairs.

As we take this opportunity to debate and celebrate all that is Welsh and our pride in Wales, perhaps there is a lesson to be learned from our national team’s sensational last-minute victory against Scotland the other Saturday-do not write off the red team until the final whistle. By the way, I am talking about rugby and politics, not football.

Of course, no one can deny that this year has been tough for us all-families, businesses, communities and Governments the world over. Yet, even in this difficult year, Wales has seen a number of firsts, such as our first Ashes test match and the first time that the UK Cabinet has ever met in Wales. We have showcased the very best of Wales as a great place to visit, to watch world-class sport and to do excellent business.

The people of Wales have also resolved that the rise of racist, fascist organisations must be stopped. These far-right groups first tried it on in Swansea, but then abandoned their vile demonstration plans in Newport and Wrexham in the face of decent, concerted community action. We must not be complacent, however; wherever the so-called Welsh Defence League and the British National party threaten our decent, tolerant communities in Wales, we must all stand together to resist them. I am pleased to confirm that the first ever conference of Unite Against Fascism (Wales) will take place in Cardiff in early March, and I would welcome support from any and all parties in Wales. Together, we must prevail over the poison of racism.

Our main task now is how we secure the recovery in Wales, and the fact that securing the recovery, rather than sliding back from recession into depression, is now on the agenda has not happened by chance. After the worst global recession for 80 years, other economies have experienced far higher levels of unemployment-Spain 19.5 per cent., France 10 per cent., Ireland 13.3 per cent., and America 9.7 per cent. The figure for Wales is 8.6 per cent.

Mark Pritchard (The Wrekin) (Con): The Deputy First Minister of Wales, Ieuan Wyn Jones, has said that there is “no room for complacency” on unemployment figures. The Secretary of State refers to other parts of the world, but is it not a fact that the unemployment rate in other parts of the United Kingdom is 7.9 per cent., which should be compared with the 8.6 per cent. rate in Wales that he has mentioned? Thus, the comparison also needs to be made with what is happening within the United Kingdom; we should not just make the comparison with other parts of the world.

Mr. Hain: I am very happy to make the comparison with other parts of the United Kingdom. As I shall describe later, if we were to examine Wales’s performance now compared with what happened during the recessions of the 1980s and 1990s under the previous Conservative Government, when the recessions were not nearly as bad as this recession either within the UK or across the globe, we would find that we have done far better on employment and unemployment.

Mark Pritchard rose-

Mr. Hain: I shall come to those points in due course.

Our Government and the Welsh Assembly Government have painstakingly secured a strong Welsh economic platform to build for the future. Until Spring 2008, Britain experienced an unprecedented period of continuous growth for more than 11 years under our Government, which saw the United Kingdom’s gross domestic product grow by more than 32 per cent. since we came to power in 1997. However, the global financial implosion that followed has hit that enormous achievement for six, and the Government have had to respond, not by downing tools as Conservatives did in the 1980s and 1990s to disastrous effect in Wales, but by active intervention to fill the gap left by the collapse in private sector activity and investment.

Fair-minded people now accept that our Government made the right choices. We saved the banking system, on which every business and household in this country depends-the Tories opposed that action, just as they opposed the fiscal stimulus package, which, among other things, has delivered a £1 billion future jobs fund. That has already created more than 9,900 job opportunities for young people across Wales, stopping them from being thrown on to the scrap heap as happened under the Tories in the 1980s and 1990s with most never to work again.

The stimulus package has also delivered the car scrappage scheme. More than 347,000 orders have been taken since the start of the scheme, 17,350 of those in Wales, thus protecting jobs and companies in the automotive sector. It has also delivered the business support schemes, such as the time to pay arrangements, under which more than 11,100 businesses have deferred nearly £155 million of business taxes in Wales alone. That comes as a result of the action that we have taken as a Government-it is all action opposed by the Conservatives.

Lembit Öpik (Montgomeryshire) (LD): May I put on record my gratitude to the Secretary of State and his fellow Ministers for the help that they have provided, first in securing Regal Fayre, which is a new company in the town of Montgomery, and secondly, in helping to save 180 jobs in the Shop Direct call centre in Newtown? It is my opinion that the Government’s assistance directly contributed in a positive way to saving those jobs, and I am grateful for the assistance that he has personally provided.

Mr. Hain: It is not often that we get thanked from across the Floor of the House, so I am grateful to the hon. Gentleman for those thanks. He has worked tirelessly on behalf of his constituents and has properly represented them to the Government, and we have been able to help in the way that he has described. I am very pleased for the local work force that that is the case.

We have given real support-real help for real people-requiring rises in public investment without which the Government deficit would be even higher. The irony of the Tories’ opposition to our recent public investment programmes is that the very Government deficit they complain about would have been even higher had we taken their approach, because there would have been more unemployment and greater borrowing to finance people who would have been on the dole instead of in work, earning incomes and paying their taxes.

Mr. Stephen Crabb (Preseli Pembrokeshire) (Con): The Secretary of State has tried to make some reassuring remarks about the size of our deficit. Our deficit is £178 billion-it is even bigger than Greece’s, yet I saw that the Prime Minister was trying to lecture the Government of Greece about fiscal responsibility. There is nothing reassuring and no reason to be complacent about the size of the UK’s deficit-it is a disaster for the country.

Mr. Hain: Nobody, let alone members of the Cabinet, such as myself, is being complacent. My point is that if we are that concerned-as we all, including the hon. Gentleman, ought to be-about the size of the deficit, why would we make it worse? That is what the Tory policies over the past year would have done and what Tory policies over the coming year would do. If a Government closed down many more businesses and gave many more people the sack-that is what the Tories would be doing-the deficit would grow higher. Everybody understands that; it is schoolboy and schoolgirl economics. That would be a consequence of Tory policies.

Mrs. Cheryl Gillan (Chesham and Amersham) (Con): While the right hon. Gentleman is painting such a rosy picture of Labour’s time in office, could he explain why 200,000 children in Wales still live in poverty-as measured before and after housing costs in the Department for Work and Pensions report, “Households Below Average Income 2007-08”? Can he also explain why Save the Children claimed last month that 96,000 children in Wales are living in severe poverty under his Government?

Mr. Hain: It was because we are concerned about the numbers on poverty that we set a target for abolishing child poverty just as soon as we can. What I cannot understand is how the hon. Lady’s policies for cutting child tax credits and child trust funds will help with the well-being of children in Wales. After a period of disastrous increases in pensioner poverty, child poverty and poverty across the board in Wales under the Conservative Government whom she supported, we have reduced the level of poverty for pensioners and children in Wales.

Mark Pritchard: On a point of order, Mr. Deputy Speaker. [Hon. Members: “A point of order?”] I know that this seems odd, because I do not raise many points of order. However, it is an important matter for the historical record when a Secretary of State of Her Majesty’s Government comes to the Dispatch Box and says something that is completely inaccurate. He claimed that a Conservative Government would-

Mr. Deputy Speaker (Sir Alan Haselhurst): Order.

Mark Pritchard: He claimed that they would abolish child-

Mr. Deputy Speaker: Order. What is a point of order is that when the occupant of the Chair rises any other hon. Member should resume their seat. Perhaps the hon. Gentleman is wise to be sparing in his points of order, if he thinks that that constituted one-it is more a matter for debate. He has said something on the record; he must be satisfied.

Mr. Hain: I am surprised that the hon. Gentleman rose, because it is a matter of record what the Tory party’s policies are on child trust funds, child tax credits and other such matters. The Tories were wrong on the recession, and they are wrong on the recovery. Their plans for early and savage public investment cuts would choke off the recovery. They have no plans for growth-they have only a plan for austerity.

Our Labour Government investment has ensured that, despite the worst global economic recession in more than 80 years, we have avoided the spectre of industrial decline, long-term unemployment and run-down public services-those are the kind of problems that Welsh people lived through to such terrible effect in the 1980s and 1990s.

Albert Owen (Ynys Môn) (Lab): This September, my wife and I will be celebrating our 27th anniversary. In the 1980s, we bought our first house and interest rates were 13 per cent. Mortgage rates varied in the ’80s and ’90s between 13 and 17 per cent., and house repossessions were at a record high. Is not the big distinction that the inflation rate is 3.5 per cent. now, not 13.5 per cent.? That lower rate not only helps couples to stay in their homes, but helps small businesses and the economy to recover.

Mr. Hain: First, may I congratulate my hon. Friend on an excellent 27 years of marriage? He is right to say that many people like him who bought their first house in the late 1980s were immediately plunged into negative equity as a result of the disastrous policies of the then Conservative Government. As I have said, our Labour Government investment has ensured that we have avoided the worst consequences of this recession and that employment levels and other indicators are better than they were in the 1980s and 1990s.

Our record speaks for itself-

Mrs. Gillan rose-

Mr. Hain: May I finish this point? Our record speaks for itself. There are still 95,000 more people in work in Wales than when Labour came into office in 1997. Long-term unemployment in Wales is more than 55 per cent lower than it was in 1997, despite the recession. It is almost 70 per cent lower than it was at the height of the last home-grown recession in the 1990s. Average house prices in Wales are more than 140 per cent. higher than they were when we came to power in 1997. Repossessions in Wales are 39 per cent lower than they were in 1991. The average household has nearly £5,000 more disposable income now than in 1997 and gross value added per head in Wales has risen by 49 per cent. since 1997. In the early 1990s recession, many more businesses failed in Wales, with the company liquidation rate two and half times higher than the current rate. On that high note, I give way to the hon. Member for Chesham and Amersham (Mrs. Gillan).

Mrs. Gillan: I am grateful to the Secretary of State for giving way, because it gives me the opportunity to congratulate the hon. Member for Ynys Môn (Albert Owen) and his wife on 27 years of happy marriage. Many congratulations to them. It is not good enough for the Secretary of State to say one thing in this place and another outside. Will he get his stories right? I believe that he said on BBC Wales online on 22 April last year that if efficiency savings had been made “earlier on at a time of rising spending…I think,” We “would have been in a better position to move forward.”

Which is it? Has his Administration messed up or does this wonderful picture that he is trying to paint for us now show what has happened? While I am on my feet, let me mention that he said in The Western Mail that characterising the situation as a case of “‘nice’ Labour reductions in public spending”

Versus

“‘nasty’ Tory cutbacks would be a mistake”.

That is a mistake that he is making now.

Mr. Hain: The planned Tory cutbacks would be nasty in their effect on Wales.

The difference between a Tory Government and this Labour Government is as I have just described: repossessions are relatively low; average house prices are higher; average household income has risen; unemployment is lower; and the rate of business failures is much lower than it was during the home-grown, Tory-induced recessions of the early 1990s and early 1980s, which were unlike the global recession from which we have suffered in recent times. That is the difference between a Tory Government and this Labour Government. A Tory Government leave people on their own, and a Labour Government are on those people’s side.

Mr. Philip Dunne (Ludlow) (Con): On the subject of business collapse, does the Secretary of State appreciate what has happened in the petrol filling station arena? More than 111 petrol filling stations have closed in the past five years as a direct result of what the Labour Administrations here and in the Assembly intend to introduce with the business rates revaluations. Increases without any transitional relief, such as that in England, are putting at risk the remaining 572 petrol stations in Wales, of which 206 are in rural areas. One of those is facing an increase in business rates of 725 per cent. How does he expect that business to survive that kind of increase?

Mr. Hain: I know that there is concern about business rates and the changes in Wales, but 60 per cent. of businesses benefit from those changes according to the Welsh Assembly Government. The reasons for petrol station closures are much broader than the hon. Gentleman suggests, and not least among them are the extremely cheap prices from supermarkets. To my regret-as a result of market forces, not of action by this Government-they are forcing too many local petrol stations to close.

Mr. Roger Williams (Brecon and Radnorshire) (LD): The Secretary of State claims credit for his Government for the fact that this recession is not as acute and difficult as the last one. Individuals have made a contribution, too, by working part time and by cutting their hours. There has been a huge amount of suffering as a result of the recession, but individuals have played their part in helping. I am sure that the Secretary of State wants to congratulate them on that.

Mr. Hain: I am grateful to the hon. Gentleman for giving me the opportunity to do so. I was openly arguing that the recession has been very tough for people; I said that right at the beginning. Individuals have made sacrifices such as working fewer hours and, as a result, having lower earnings, and that has helped us to get through this terrible recession, which has been a worldwide recession, in better shape than we would have been-this is my point-if we had followed the policies of the Conservative Opposition. Had they been in government, everybody in Wales would have been far worse off. That is indisputable.

Mark Pritchard: Will the Secretary of State give way?

Mr. Hain: I shall take one final point from the hon. Gentleman.

Mark Pritchard: I am grateful to the Secretary of State, who is being very generous in giving way. I think that I might be the only person in the House who has worked in a petrol filling station-Cymmer Afan petrol station in Cymmer, where I used to live in Wales. Cymmer Afan petrol station had been there for years and was run by a wonderful family, but it closed down just before Christmas. I am shocked by the Secretary of State-I know that he has been busy celebrating his 60th birthday this week, but he should not forget that unemployment is not low in Wales, but high at 8.6 per cent. Forgive me, but I believe that the Secretary of State’s complacency is breathtaking.

Mr. Hain: The hon. Gentleman will find in the official record, as everyone else in the House will have noticed, that I quoted that figure of 8.6 per cent. earlier in my speech. My point was not that it was not of concern-of course it is. I represent a Welsh constituency where people have lost their jobs. My point is that without Government action and that if we had followed the Conservative prescription, which he supports, of cutting public investment-

Mark Pritchard indicated dissent.

Mr. Hain: That is what the Conservatives have said. They have said that we spent too much money on business support, job support programmes and so on over the past year. If we had taken that course, those problems would have been far worse.

Dr. Kim Howells (Pontypridd) (Lab): I thank my right hon. Friend and hope that he can now get on with the substantive part of his speech. He will recall that in the 1980s, after the terrible onslaught on our basic industries, Wales reinvented itself. The industrial areas of Wales reinvented themselves, and we will do so again. Will he tell the House something about how the Government see the way forward for breaking with the enormous dependence on the public sector? If Wales does not reinvent itself as a home for entrepreneurs, for small businesses and for high-technology industries, we will miss out on the new generation of industries in the future.

Mr. Hain: I cannot agree more with my right hon. Friend. May I take this opportunity to pay tribute to him for his long service in the House and for his excellent record as a Labour Minister and to express my personal disappointment that he is standing down, although I understand his reasons for that? This will be his last Welsh affairs debate. I agree with him absolutely. A little while ago, I made a speech in the House in which I said that we had to strengthen our private sector and could not rely on the public sector to the extent that we had. However, that requires new investment to support the new industries and businesses of the future and to unleash the entrepreneurial spirit and innovation that we need, particularly in low-carbon industries and the digital economy. That requires Government support-it does not happen on its own. Individual entrepreneurs and small businesses need to grow with Government backing, not to have that support stripped away from under their feet so that they are unable to deliver what they are capable of.

Mrs. Gillan: Will the right hon. Gentleman give way?

Mr. Hain: I think I need to make a bit of progress.

Mrs. Gillan: One more time?

Mr. Hain: Okay.

Mrs. Gillan: I am grateful to the right hon. Gentleman for giving way, but I want to give him the opportunity to set the record straight. I believe that I heard him say earlier that fewer companies have gone to the wall in Labour’s recession. I understand that more companies have gone bust in Labour’s recession than in any other recession since records began. There were 26,978 corporate compulsory liquidations and company voluntary arrangements. That information comes from the Office for National Statistics time series and the Insolvency Service’s “Company liquidations in England and Wales 1960 to present”. Will he confirm that he did not make an error when he said that he felt that fewer companies had gone bust in this recession? I think that these statistics prove that he was wrong in this instance.

Mr. Hain: What I said-I shall read again to the hon. Lady from my speech-was that in the early 1990s recession, many more businesses failed in Wales, with the company liquidation rate two and half times higher than the current rate. That is my point-not that the current rate of liquidations is acceptable or that any business failure is acceptable. Things were relatively far worse in the 1980s and 1990s, and specifically in the 1990s in that respect.

Our action both in Westminster and in Wales has delivered real help to individuals, families and businesses across Wales, and we will continue to do that as the Welsh economy recovers. To cut off support now, as the Conservatives and right-wing commentators propose, would wreck the recovery. With oil prices rising, international volatility and the weak eurozone, and with countries such as Greece and Ireland facing serious crises, we must prevent this fragile recovery from sliding back into recession or, even worse, from causing a severe, prolonged depression.

Ann Clwyd (Cynon Valley) (Lab): I know that my right hon. Friend supports the idea, as does the Prime Minister, of a Robin Hood tax on global financial transactions that would spread both benefits and risks more fairly. Will my right hon. Friend elaborate on his support for that tax?

Mr. Hain: I am grateful to my right hon. Friend for that question. She is absolutely right to say that I have supported the Robin Hood tax, as most fair-minded people have. Indeed, the extent and breadth of support for it has been interesting. It is now backed by groups right across the board, from the Salvation Army to those such as Friends of the Earth, which we would have expected to support it. That is entirely consistent with the Prime Minister’s international leadership in seeking to get an international tax on financial transactions, not least to provide insurance support to prevent the banks from collapsing and having to rely on the public purse in the future. I am glad that my right hon. Friend gave me the opportunity to make those comments.

The Tories have lost all credibility on the economy. First, they promised austerity, until they realised that that did not play well with their focus groups. Then they said they would cut the deficit “further and faster”, but later realised that the sums did not add up. Now they have changed tack again and all they will say is that they will “make a start” on cutting spending. They are making it up as they go along, giving a nod to their baying right and then a reassuring wink to their worried left. They cannot be trusted and they would deliver a decade of austerity and low growth for Wales. They would cut support to the economy, which would lead to higher unemployment, bigger welfare bills and in turn to even higher borrowing and debt. They would bury hope with pessimism and would deliver a decade of austerity rather than the decade of growth that we plan.

In January, Britain emerged from the toughest recession since the 1930s. The growth figure, although modest, combined with the good news that unemployment in Wales fell for the first time since the recession began, means that we can be cautiously-I stress cautiously-optimistic. But things will not be easy; our priority now is to lock in the economic recovery. Access to finance from banks is still a major problem for too many businesses, especially small ones. I heard yesterday from representatives of small businesses in Cardigan whom the hon. Member for Ceredigion (Mark Williams) brought to see me with the hon. Member for Montgomeryshire (Lembit Öpik). Those businesses are having difficulties with the banks. Far too many businesses are unable to get loans from banks at rates that they can afford. The banks are charging small businesses ridiculously high rates of interest, as the hon. Member for Ceredigion explained to me.

Mr. Elfyn Llwyd (Meirionnydd Nant Conwy) (PC): I appreciate the Secretary of State’s comments on this issue. We are all struggling with businesses that are unable to get reasonable credit, but was not the right time for the good Lord Myners to impose certain conditions in that regard when the deal was struck and the money was put into the banks?

Mr. Hain: We have been pressing the banks. We have done so since the beginning and during negotiations that led to the support, without which the whole banking system would have collapsed. We have stressed that the priority is for the banks to get the money out into the real economy. They have spent most of the time recapitalising themselves. As the hon. Gentleman has raised this point, let me report briefly on the past couple of economic summits that have been convened by the First Minister in Wales with my support and with the participation of a wide range of groups, including businesses and trade unions. One of the most telling points that everyone accepts, given the evidence that we have received, is that local bank managers no longer have-and have not had for the past 10 to 15 years-the autonomy to take certain decisions. That applies even though some of them have built up relationships with local businesses, know them and their directors and know the health of the economy. Instead of being able to sign off loans and continue credit arrangements, they have to pass decisions up the line to someone who sits at a computer, feeds material in and then says no.

Lembit Öpik: I know that it is not fashionable to do so, but I have to report two bits of good news. HSBC and the Royal Bank of Scotland have recently been quite helpful during detailed negotiations, but they are strapped by the recapitalisation demands on them. Nevertheless, does the Secretary of State agree that had the Conservatives been in government at the time and presided over the collapse of the banking system, there would have been no prospect whatever of economic recovery? It seems to me that that is what would have happened if they had carried out their promises at the time.

Mr. Hain: Again, the hon. Gentleman is absolutely right and speaks the truth. At that really difficult moment when the whole of the banking system could have collapsed, after which people would have lost their savings and much calamity would have resulted, if the disastrous policies that the Conservatives advocated had been followed, they would have made things much worse, whereas people accept that our policies have delivered results.

As I have said, it will not be easy to emerge from recession. We need to lock in the economic recovery, but finance from the banks is still a major problem. That is why we have committed another £500 million to the enterprise finance guarantee scheme, thereby enabling more businesses to access it. Currently, more than £33 million of loans have been offered to nearly 430 companies in Wales. Again, that support would be cut by the Conservatives.

Hywel Williams (Caernarfon) (PC): While the Secretary of State is in a happy and optimistic mood, will he tell us whether he is happy with the bonuses being paid by RBS? I think that the figure announced this morning was £1.3 billion. Is he sanguine about that?

Mr. Hain: I think that bankers have made themselves even more unpopular than politicians in recent times, and that is saying something. I do not like that level of bonuses. The chief executive of RBS has said that he is not taking a bonus. Obviously, the high bonuses for high earners have been restricted in all sorts of ways as a result of Government intervention, but the banks need to explain to the public, whose money has bailed them out, how they can possibly justify those very large bonuses. They need to give those explanations to the citizens of-in this case-Wales.

On the banks, how can anyone take the Tories seriously when they say that they will cut the deficit further and faster, now that they are planning practically to give away bank shares? Their deficit reduction plan is a total farce. As for shares in the banks, the public rightly demand that we should focus on getting back their money-the £70 billion that was handed to the banks by the Government. We were right to bail the banks out because we had to save the banking system so that the recession did not become a prolonged depression. However, it should be obvious to everybody that any responsible Government who are really committed to cutting the deficit and getting those billions of pounds of public money back must not discount those shares but sell them at a time and in a way that will maximise their value to the taxpayer. The Conservatives have merely offered the people of Wales and the United Kingdom an irresponsible and costly political gimmick. By contrast, we have supported businesses and our intervention has avoided unemployment rising as high as many predicted it would. Unemployment in Wales has fallen slightly in the past two months, but we cannot be complacent; unemployment may rise again and every job loss is devastating for those concerned.

We know that young people across Wales have been hit particularly hard by the recession but we will not condemn a generation to unemployment like that in the 1980s and 1990s. To prevent another generation from being lost to work we have extended the young person’s guarantee so that young people receive training and support after six, rather than 12, months, to ensure they have the necessary skills for permanent worthwhile employment. That said, youth unemployment in Wales is still a quarter lower than it was at the height of the early ’90s, and long-term youth unemployment is nearly two thirds lower.

Alongside those measures, we are looking to the future. We are not cutting back, but are investing to promote growth in the new industries of the digital, low-carbon economy that my right hon. Friend the Member for Pontypridd (Dr. Howells) mentioned earlier. We have used the strategic investment fund in Wales to invest in a £44 million high-performance computing institute-a world-class facility to build a world-class Wales. By giving companies in Wales improved access to the latest IT and training, we can ensure that Welsh businesses are able to compete on a global stage alongside other world-leading innovators.

Faster growth means more people going back to work, thus cutting the costs of unemployment and cutting the deficit. If we had walked by on the other side, believing that unemployment was a price worth paying, then the deficit would be even greater and unemployment rates even higher. That is the reality of a Tory recession. We saw it in the 1980s and ’90s: will they never learn?

I say it again: Welsh citizens need a Government who are on their side, not a Government who leave them on their own. That is why we celebrate-

Mr. Crabb: Will the Secretary of State give way?

Mr. Hain: I have given way a lot up to now, and I want to make some progress.

That is why we celebrate, not apologise for, this 10th anniversary of Labour passing the National Minimum Wage Act 1998. It remains one of this Government’s proudest achievements, having benefited millions of people. The latest increase in the national minimum wage has benefited over 50,000 workers in Wales alone.

When the hon. Member for Chesham and Amersham voted against the national minimum wage, as she did-

Mrs. Gillan indicated assent.

Mr. Hain: The hon. Lady nods her head in satisfaction. Then, wages of as little as £1.20 an hour were common and legal in our constituencies. That is just £1.38 an hour in today’s prices. So when she tries to say that she cares about families and people struggling to make ends meet, just imagine what it would be like to live on £1.38 an hour today, as might have been the case without the minimum wage.

Mrs. Gillan: The right hon. Gentleman knows that that sort of rhetoric is rather cheap, and that I do care about families and individuals. The minimum wage has certainly done a good job in places, but would not a minimum income have been better for families?

Mark Tami (Alyn and Deeside) (Lab): The hon. Lady did not argue for that.

Mr. Hain: She certainly did not argue for that. Is she now saying that she was wrong on the minimum wage, just as she has been, and in her current policies continues to be, so wrong on so many other things? The Leader of the Opposition said that the minimum wage “would send unemployment straight back up”, but Labour has delivered a rising minimum wage, and more people in work than ever before in Wales.

We also want to take Wales forward as part of a digital Britain. The Conservatives seem ready to cast aside any broadcaster that dares to compete with Rupert Murdoch. We say that sharing a fraction of the BBC’s licence fee-and it is only a tiny fraction- is necessary to help make sure that we get diversity of television news and strengthen local and national media outlets across Wales. [ Interruption. ] The hon. Member for Chesham and Amersham is muttering into her cups over there, but the Opposition are opposing our support for a new news outlet on Channel 3.

If the Conservatives get their way and refuse to back the pilots with the funding from the licence fee that we support, there is a real danger that Channel 3 will no longer have Welsh news, and that “Wales Tonight” and the other news programmes that it broadcasts will be lost. That funding is only a tiny fraction of the licence fee and, as I say, it is necessary to help make sure that we get diversity of television news and strengthen local and national media outlets across Wales. We want choice for the many and not, as the Opposition would prefer, profits for their rich friends.

Andrew Mackinlay (Thurrock) (Lab): I am very grateful to my right hon. Friend for giving way and I apologise for interrupting. I asked the nice man sitting on his left, who seems to have an advance copy of my right hon. Friend’s speech, whether he was going to deal with governance. I got the impression that he was not, and I did not want to be disappointed about not intervening to ask about it.

As an English Member of Parliament I am very interested in governance, and hope that my right hon. Friend will address this issue. Ministers with primarily English portfolios have taken arbitrary decisions without consulting their opposite numbers in Belfast, Edinburgh and Cardiff. As Secretary of State for Wales, will he jealously press the Justice Secretary, who is the custodian of these matters, to ensure that that does not happen?

By way of example, and in conclusion, I refer to the arbitrary decision of the Secretary of State for Health to abrogate and tear up the reciprocal health agreements between the Isle of Man, Guernsey and Jersey, without consulting the Health Ministers in Wales, Edinburgh or Northern Ireland.

Mr. Hain: My hon. Friend has got me on that one. I always admire his energy as a parliamentarian, but this Government have been an enthusiastic devolver of power. We have devolved more powers than any other Government in our history, and of course we respect the rights of Wales, Scotland and Northern, as we do those of the islands that he mentioned.

I cannot for the life of me understand why the hon. Member for Chesham and Amersham now opposes the 50p monthly levy on telephone line rentals to finance super-fast broadband everywhere in Wales. How can she justify all the “not spots” in Wales, and all the households and businesses there-such as those whose representatives the hon. Member for Ceredigion brought to see me yesterday-that are now unable to get broadband? How can she justify them falling even further behind while the rest of Britain forges ahead?

Adam Price (Carmarthen, East and Dinefwr) (PC): In response to the question about governance raised by the hon. Member for Thurrock (Andrew Mackinlay), the Secretary of State rightly said that he has been an enthusiastic proponent of devolution. Will he tell the House when he intends to reply to the letter written to him by his colleague the First Minister for Wales?

Mr. Hain: I have replied to that letter, and on Monday I put a copy of the First Minister’s letter and my reply in the Library of the House of Commons.

Lembit Öpik: On broadband, I am heartened by the Government’s apparent commitment to address “not spots”. Many of my constituents live in such areas, so will he say when they can expect to be connected to broadband? At present, they can do that by satellite, but there are some technical limitations to what they can get by that means, which is also tremendously expensive. They will be very encouraged if they can get an assurance that the Government are truly committed to funding the arrival of broadband, especially in small towns and villages such as Darowen and Staylittle.

Mr. Hain: Indeed we are committed to that. It is precisely to address the future needs of the Welsh economy that the Government want businesses and residents in the small towns of the kind that he and many of us represent to have access to fast, high-quality broadband. We have proposed the levy of 50p a month on telephone line rentals to fund that. I cannot give a time scale, but I am happy to write to the hon. Gentleman, especially if he lets my office know which specific areas he is talking about.

Mrs. Gillan: Many pensioners-perhaps especially those who live on their own-are not familiar with the iPhones and other mobile telephone technology that both the Secretary of State and indeed I have. Has he calculated how many of those pensioners will be paying this levy? How many business and call centres will pay it, and would it be better for them to relocate to other places?

Mr. Hain: What is the hon. Lady suggesting-that paying a UK-wide levy of only 50p extra a month should encourage residents and businesses to flee our shores wholesale? How would she address the issue? We get no policies from the Conservatives on these vital questions, whereas we have provided a practical and funded route to delivering universal broadband.

Mrs. Gillan: How many pensioners?

Mr. Hain: I can take my own mother as an example. She is a Welsh pensioner, and is quite happy to pay the rental. She is on broadband, and emails and texts almost obsessively. I suppose that she is an example of a modern pensioner in Wales, and I know that she is happy to be part of the broadband revolution that the Conservatives oppose.

Under Labour, the Welsh budget has more than doubled from under £7 billion in 1996-97 to nearly £16 billion in 2010-11-a bigger real terms rise than ever in Wales’s history. The Welsh Assembly Government have opened nine new hospitals, and of course introduced free prescriptions. That policy is now under threat from the Tories, but it particularly benefits those people on low incomes or with chronic illnesses who may not have previously been eligible for free prescriptions under the complicated and outdated exemption system.

The Welsh Assembly Government have introduced free primary school breakfasts for more than 900 schools across Wales-also a policy under threat from the Tories. Free bus travel for the over-60s and concessionary rates for people with disabilities have also been hugely successful, with more than 600,000 people benefiting from free travel. That is also under threat from the Tories. In Westminster, we are passing laws to promote equality, tackle discrimination, help vulnerable people with their energy bills, grant equal treatment for agency workers and enshrine in law for the very first time our commitment to abolish child poverty. Those policies were all resisted by the Tories. That is the role of an active Government who care, and that is a programme for a Labour Government who help the many, not a Tory party that wants to help out only a tiny few.

People in Wales increasingly realise, when they add it all up, that they cannot afford to lose this Labour Government. The Tories would be a change that we in Wales cannot afford. Instead of proposing tax breaks for millionaires, we are protecting the most vulnerable. On average in 2009-10, as a result of our tax and benefit changes, pensioner households will be £1,500 a year better off than they would have been if the pre-1997 system had continued. On average, the poorest third of pensioner households will be £2,100 a year, or £41 a week, better off than they were under the 1997 system-due to the Government’s tax and benefit changes.

Our winter fuel payment has risen from £10 under the Tories to £250 for the over-60s, rising to £400 for the over-80s. Again, they are policies offering vital support that could well be cut under the Tories’ austerity programme. Evasive and unfair: that is the Tory attitude to Wales. The shadow Chancellor, through his pay freeze, would on average cut the pay of every nurse and teacher in Wales by about £300 per year-all at a time when those at the top would receive the biggest tax breaks. Under the Tories’ initial proposal for the married couple’s allowance, for example, the highest earners would receive 13 times as much of the benefit as someone at the other end of the income scale. As soon as that proposal came under scrutiny, the Tories buckled, being unable to explain how a mother who was suddenly widowed would become poorer under their married tax allowance policy. They are trying to make policy with a nod and a wink.

We will reduce the public deficit fairly by halving it within four years. We have always said that we will ensure that those with the broadest shoulders bear their fair share of the burden. Those words have been borne out by actions, such as our new 50 per cent. top rate of tax, a pay freeze for top civil service earners and a one-off tax on bankers’ bonuses of £25,000 or more. All those measures have been opposed by the Tories. Instead, they are sticking to their plans to give the 3,000 very richest people an extra £200,000 each in inheritance tax cuts, while delivering savage public spending cuts and a pay freeze for public sector workers.

We have delivered on our spending review promise and increased Welsh funding by £500 million for 2010-11. That is new money, and it would not be going to Wales if the Tories had their way.

Mr. Crabb: The right hon. Gentleman sits in a Cabinet that approved a brutal cut of almost £1 billion to the higher education budget in England, meaning that many thousands of Welsh students who are hoping to study at English universities later this year will be told that they do not have a place. Indeed, they will probably go on the youth unemployment roll, so has does that benefit young people in Wales?

Mr. Hain: We have asked universities to make efficiency savings, and I do not think that “a brutal cut” is a phrase that any vice-chancellor recognises. Indeed, one Welsh vice-chancellor told me relatively recently that he thought that the measure could be easily absorbed without any of the consequences that the hon. Gentleman describes. Interestingly, the number of people applying to and getting into universities has been rising steadily, including over the past year.

We are in no doubt where the truth lies: the Tories would have an emergency Budget within weeks of entering power and leave Wales as the biggest casualty, with hard-working Welsh people fighting for their livelihoods. The Tories would make savage and swingeing cuts to the public services of Wales, creating a huge rise in unemployment and a collapse in businesses that supply the public sector.

So where else would those cuts fall? The Tories cannot deliver what they promise without slashing investment in Welsh schools and hospitals, Sure Start and large projects such as launch aid for the new Airbus planes at Deeside. Since 1997, and after years of decline in our public services, we have invested in our health service, schools, infrastructure and police force. People depend on those services being well funded and efficient, and in Wales there are almost 7,300 police officers-700 more than in March 1997.

Health spending in Wales has increased under Labour to more than £1,900 per person per year, and that is more than double the 1996-97 Tory figure. GP numbers have risen by 9 per cent. over the past decade, and nursing, midwifery and health visiting staff numbers rose by one fifth. They are all Labour policies that deliver real help to people in Wales. Wales faces a stark choice between securing the economic recovery or wrecking it; building a fair society where everyone prospers or a divided society that favours a few; and protecting front-line services or a programme of savage cuts. That is the choice that people will face in a few weeks’ time.

Our actions will not be painless, but nor will they be reckless. The recovery is coming now because of the action that this Government have taken. However, the recovery in Wales is still fragile, and Tory policies threaten it. Only Labour can secure the jobs and mortgages of people in Wales; the Tories would be a change that we in Wales cannot afford. The red team may be the underdogs, but the blue team are crumbling under pressure, and momentum is as important in rugby as it is in politics. We will keep going to the final whistle on polling day in order to save Wales from the disaster of a Tory Government.

Welsh Day Debate 2009

Mr. Peter Hain (Neath) (Lab): I apologise to the House, as I will have to leave almost straight after I sit down; I have to go to Cardiff to join battle with the shadow Welsh Secretary on “Question Time” tonight. I am sorry that I will not be here for the winding-up speeches.

I was grateful that my right hon. Friend the Secretary of State responded positively to my request that he look into the South Wales police funding crisis. I suggest, however, that the problem lies more at the Welsh than the Westminster end in respect of the meeting that he might be attending. I hope that those who made the decision will reverse it in Wales.

Another policy area for which decision making remains at Westminster is broadcasting. The House should give proper attention to the impact on audiences in Wales of the decisions on the future of public service broadcasting that Ministers must take in the coming months. There is room for considerable concern, and I am grateful that, as my hon. Friend the Member for Aberavon (Dr. Francis) reported, the Welsh Affairs Committee will look into the matter.

ITV said publicly that the cost of its public service obligations will exceed the benefits of being a public service broadcaster earlier in Wales than in Scotland or Northern Ireland—in other words, the situation is more serious in Wales. In January this year, ITV Wales reduced its news output to four hours a week, and its general programming for Wales to a mere 90 minutes a week. Only a few years ago, its general programming amounted to nearly seven hours a week. There is no certainty that even that 90 minutes—that hour and a half—will last more than a year or two; we could go from seven hours a week to nothing in a few years.

I also understand that BBC Wales is having to find savings of £3 million a year for the next five years. That is bound to restrict the ambition and range of what it makes for Welsh viewers and includes, of course, the ending of BBC2W. Taken together, this represents a shocking reduction in service for Welsh viewers. The Assembly’s broadcasting advisory group calculates that between 2006 and 2013 the annual value of English language programmes made for Wales will have reduced by more than £20 million. There is a great danger that this will become permanent. That prospect raises economic and cultural issues for us in Wales, as well as questions about the role of television in our democracy.

There are some welcome conclusions in Ofcom’s final report on its public service broadcasting review, as there are in Lord Carter’s interim report, “Digital Britain”. I particularly welcome the support for the continuation of S4C, the recognition that we must retain a strong and viable competitor for the BBC in Welsh news, and Lord Carter’s suggestion that we should plan for a digital universal service commitment by 2012. I know that my right hon. Friend the Secretary of State, who also has a brief for digital inclusion, is considering that issue. However, neither Ofcom nor Lord Carter seems to have given sufficient weight to the issue of general programming made for audiences in the nations. Indeed, Lord Carter’s report does not address the issue at all, concentrating solely on the provision of news and production quotas for the UK networks. Ofcom recounts the proposals made by various bodies in the nations, including the Welsh Assembly Government and its broadcasting advisory group, but makes no firm recommendation.

Since 1982, an honourable provision has been made for the Welsh-speaking audience through S4C, which has provided a wide range of programmes, and successive Governments have given this greater care and attention. We must now show equal care and attention for programme services for the majority non-Welsh-speaking audience in Wales. Most Welsh viewers—indeed, 80 per cent.—speak English rather than Welsh.

Unless something is done, the BBC could soon be the only provider of general programmes in English for Wales; and even that is on a downward curve. Assuming the survival of Welsh news on ITV, in future English language programmes made specifically for the audience in Wales will be totally dominated by news and sport, leaving only 10 per cent. of the output for drama, music, arts, factual, and light entertainment programmes. By comparison, S4C’s service devotes about 40 per cent. of its output to news, current affairs and sport, and 60 per cent.—10 times the amount of English language provision on the BBC and elsewhere—to other programmes. It is important that we share the view conveyed to Ofcom by the Welsh Assembly Government that “this is not a defensible proposition for a developed national community that brings to the table the sort of cultural legacy that Wales commands”.

One of the successes of devolution is that it has given a greater focus to cultural policy. The fact that our actors and singers, poets and artists are getting unprecedented attention is of huge value to Wales as a whole. We have all cheered at the success of “Dr. Who” and “Torchwood”, Michael Sheen and, of course, Duffy, who received those marvellous Brit awards last week. In television, we must not allow the soil in which many of these creative talents are grown to be carted away and dumped. “Coronation Street” is important to us all, but especially to the people of the north of England; the same can be said of “EastEnders” for the people of London. They are both a permanent presence in people’s lives. Yet I gather that last year there were only four hours of television drama in English made specifically for the audience in Wales by BBC Wales—including, of course, the excellent “Coal House”. Drama has long disappeared entirely from ITV Wales’s service. The same sad picture could be painted in comedy and light entertainment.

As regards funding, there are options—I hope that my right hon. Friend the Secretary of State and my hon. Friend the Under-Secretary will look into this—that might solve the problem without further impinging on the public purse: for example, use of the proceeds from the sale of spectrum following the switch-off of analogue transmission, or use of the part of the licence fee that is dedicated to the digital switchover campaign, which will end in Wales at the end of this year.

The audience in Wales deserves better than this very sharp decline in general English-language programming provision, and I hope that whatever decisions are made in the current months, the restoration and development of a fully adequate English language programme service for Wales will get a high priority. I fully support the move towards the development of high-speed broadband services, but the fact is that traditional television will be a major factor in people’s lives for some years to come, and probably for ever in many respects. People in Wales deserve a full reflection of their lives on television in English as well as in Welsh.

Welsh Grand Committee

Peter Hain MP for Neath: I have a soft sport for the Honourable Lady (Cheryl Gillan) but I must say that her speech symbolises the abject failure of opposition parties to propose any serious policy at all, alternative to the Chancellor’s PBR.

The Conservatives with their plans for huge cuts would plunge Wales back into the misery of the Thatcher years.

And they have absolutely nothing consistent or coherent to say about solutions to the global financial turmoil and voters have rumbled them as this mornings Guardian poll shows.

The same is true of the Liberal Democrats with their £20bn cuts plan.

And frankly Plaid Cymru’s policies are quite frankly a joke – taking as their model Iceland – a sort of policy for an ‘ice-age’ Wales – combined with independence which would leave Wales a whopping £9 billion a year worse off, more than half the Welsh Annual budget and bankrupt.

Loan finance

Can I however suggest how we might build on the PBR in respect of the endemic unwillingness of the financial institutions to provide loans.

The Financial Times reported on December 8 2008 that the Chancellor is considering an extension of taxpayer guarantees to cover business lending, because the economy is still starved of credit in spite of the £50bn recapitalisation of the banks.

The most radical Treasury option under study is apparently for the taxpayer to reopen the wholesale markets to banks by offering guarantees to securities backed by new lending. The FT reported that such a guarantee should cover lending generally, and securities backed by small business loans, car loans or other lending might be included.

I have been talking to my constituent Peter Morgan who has had 35 years of experience as an estate agent in Neath, with other offices along the M4 corridor.

He tells me that the problem for the sector can be brought down to just one factor: the total lack of availability of higher percentage mortgages (90% to 95%). There is no need for the reckless 100% or higher mortgages of previous times, he maintains and I agree with him.

But he says that lenders, in an effort to increase their liquidity, are using the media’s reports that prices are still falling, and will continue to fall, as an excuse to decline to lend.

So my proposal is for the Government to offer a form of guarantee on the higher percentage mortgages, so that if the borrower defaulted and the property were to be repossessed, the Government would repay the difference. This would mean that the lenders would have no further reason or excuse not to lend. Which would have an immediate effect on the property market.

Peter Morgan tells me that he and other estate agents have more willing sellers at the moment than at any time in his experience. At any time. Despite the lack of security in employment they also have plenty of buyers wishing to purchase, but who are unable to do so due the lack of availability of mortgage funds. So it’s not a problem of housing supply or demand it’s a problem of finance.

If the market were to be ‘kick-started’ then he feels confident that prices would no longer fall. This would result in positive publicity and hopefully stop the downward spiral. We as we all know are a nation which relies on the value of our housing stock to provide security, confidence and in a lot of cases the facility to secure future borrowing and credit.

It would be my suggestion that the Government could indemnify the lender against any loss on the mortgage advance for say a period of 2 years in the event that the property is re-possessed. This should be sufficient to guarantee that the lenders have no reason not to provide the 90-95% mortgages at a favourable rate which are desperately needed.

Due to the considerable drop in prices over the past 18 months around 20 – 25% and the reduction in interest rates, properties are now very affordable to first time purchasers in a way that they weren’t. The only reason that they are unable to buy is the lack of high percentage mortgage availablity. This also applies to the buy-to-let market.

This will boost opportunities for first time buyers, and galvanise the whole housing market because it is their inability to get home loans which has log-jammed everything.

Could the Secretary of State please raise this proposal with the Chancellor as soon as possible and let me know the outcome?

Then there is the vital issue of lack of finance for businesses.

If the Chancellor’s thinking around loan guarantees is pursued it is in line what many businesses have convinced me could make a real difference.

The banks currently look at the overall situation and see commercial risk in all directions.

When they look at, for example car manufacturing, they consider a car sales situation for a particular company, currently massively down on last year, and the precarious nature of some of dealer network.

The failure of a dealer would put extra stock into the market, undermining residual values and create a knock- on effect.

The banks then look at the supplier network and see the potential problems that a collapse of General Motors or Chrysler might have on this.

The failure of a supplier could potentially stop production lines and have a significant effect on output.

It is then possible to understand why the banks are reluctant to be flexible on their policies and bank covenants. They are just taking a normal prudent banking point of view albeit a frustratingly self interested one.

On the other hand the Government is the only party that can take a global view on the situation as it influences all aspects of the economy and to intervene as we have led the way in doing over the past month.

I think the only way we will therefore unlock funding from the banks is by way of Government guarantees for approved facilities to industries that are profitable but have short term financing issues. One would naturally expect this to be coupled with certain restrictions such that whilst the Government guarantee was in place there would be limitations on the distribution of funds from the company, and that sort of thing.

I am struck by the number of businesses I meet who have orders but are frustrated by the lack of finance to make the necessary investment to deliver those orders; this was the case talking recently to a South Wales engineering company as I did. It’s got a huge order much of it to be exported but it cannot get the production lines going because the finance is not available

Again I would be grateful if my Right Honourable Friend would raise this made-in-Wales proposal with the Chancellor and let me know the outcome?

Local Government Settlement – Revenue

Could he also discuss with First Minister the Local Government Settlement. Which seems to be in Wales unchanged by the Pre Budget Report.

In England it was over 4%, Wales just 2.9% Yet the Assembly budget has been increased in 2009/10 by 4.2%.
Including
>Health & Social Services + 5.3%
> Economy & Transport + 5.1%
> Central Services & Central Administration + 6.9%

Despite the fact that services provided by Local Government touch every child, people of working age, the elderly and those with disabilities, it is not getting an equitable share of the budget.

I applaud the Finance Minister Andrew Davies’ tough decision and his confronting a lot of difficult choices that the Assembly Government has not made over the past years.

How on earth does the Assembly prioritise investment in these critical services much lower than increases in their centrally controlled budgets including central services and admin? The latter will have a £25m increase, more than double inflation and more than treble local government.

Neath Port Talbot’s increase at 2% means a significant real terms cut of over 2 per cent.

The County Council estimates inflationary pressures will be around £10m
Cash Uplift ( with a 3% Council Tax increase)£6 m
Leaving a serious shortfall £4m or 1.73%

So efficiency savings of 1.73% are required just to meet inflationary pressures.

And that is without taking account of rising costs estimated at a further £4 million within key services that will be left under funded including
Special Education Needs
Extra social services help from adult & elderly population growth indices
Children’s social services – The Baby ‘P’ case being a particular issue to be addressed.

All in all, with the County Council will be about £8m short – meaning either massive cuts or the very big council tax hike its Labour leadership has pledged not to do.

Yet Neath Port Talbot is universally acknowledged to be the most efficient County Council in Wales delivering the best quality services from education to planning, and has already made huge efficiency savings, much greater than many other County Councils with a relatively deprived population nevertheless.

Neath Port Talbot also has a £20 million liability from the Icelandic banks. Could he please press the Chancellor or relevant Minister of State to grant local government a much more sympathetic ear than they appear to have had on this problem?

Notwithstanding these issues that I have raised, can I support the Government’s policies which show that only Labour can lead Wales successfully out of the global crisis.