Budget Statement and its Implications for Wales

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Mr. Murphy: I could not agree more. It is all the more telling because my hon. Friend is the Member for Newport, West; although Llanwern is not in his constituency, he worked there, and he is one of the two hon. Members who represent the Newport county borough. No one is more qualified than he is to say, ``Yes, we hugely regret what Corus has done, but we need also to tell the world that Newport and the rest of Wales is a good place in which to invest, to work and to grow up,'' all of which are helped by the Budget. Inflation is the lowest since records began and Plaid Cymru knows that, above all else, inflation kills economies. We have a stable economy and we are reducing the national debt in a way that was never done in the two decades when the Conservatives were in office.

Mr. Evans: The Secretary of State talks about low inflation; can he tell the people of Wales, who are now paying their council tax, why even this year, it is three times the official rate of inflation? People on limited and low incomes must find that money; is it not another example of a stealth tax that the Government passed on to local authorities to pass on to the people of Wales?

Mr. Murphy: I remind the hon. Gentleman that it was his Government who introduced the council tax in the first place. Due to the National Assembly and its excellent settlement, what the hon. Gentleman claims is not the same throughout Wales. In Pembrokeshire, for example, there is no increase in council tax. However, the council tax must be set against the standard of living and quality of life of the rest of the Welsh people. When the Conservative Government were in power, public debt rose at an unsustainable and threatening rate. In 1992, they were elected on the platform of unsustainable tax cuts, and chose to borrow and borrow, not for capital expenditure, which is why people usually borrow, but for revenue. In 1997, 44 per cent. of net public debt as a proportion of GDP was paid out in national debt interest; today, the figure is 31.8 per cent. Instead of going into the pockets of international bankers, all that money has gone into our schools, hospitals and public services. That is the difference between the Conservative and Labour Governments on national debt.

We are helping business in other ways. The increase in the VAT registration threshold to £54,000, the highest in the European Union, will help 140,000 small and medium-sized Welsh businesses. We have cut corporation tax and capital gains tax and have introduced a package of measures to help Wales regenerate its deprived areas. In particular, we are considering proposals for community investment tax credits and we are consulting on tax breaks for urban regeneration companies.

During Question Time, several members of the Committee rightly referred to the rural economy. When talking about the impact of the measures that I have described, we cannot disentangle our urban from our rural economies. At the weekend, I was in the constituency of the hon. Member for Brecon and Radnorshire. As I walked through Llandrindod Wells and Builth Wells, many people came out into the streets and spoke to me about the problems that they faced, such as unemployment and the foot and mouth outbreak. It is important that all of us in Wales understand the problems in one another's constituencies. As well as managing the change in industrial areas that I have described, we must manage a change in rural areas. We in Wales will have tremendous opportunities when we have overcome the present crisis. I am thinking of the produce that we can export to the rest of the world, whether lambs, beef or other produce from the land.

Mr. Gareth Thomas (Clwyd, West): My right hon. Friend has spoken eloquently about the great economic changes that have taken place in this and other valleys in south Wales, which have had a marked effect on the working lives of the many thousands of people who have moved from one industry to another. Does he accept that the Government have a role in managing change, not only in the urban industrial context, but in rural communities, which involves rural communities wholeheartedly embracing the fact that there is and must be change if we are to compete in an international market?

Mr. Murphy: Of course I do. Again, we are privileged to have a mix of communities in Wales. We can mix up rural and urban and ensure that we develop different ideas. Let us take the example of the constituency of the hon. Member for Brecon and Radnorshire, where he lived and where his mother taught in Hay. That town was transformed from a sleepy little market town to a world centre for books. That may be a small concern in the total economy, but not for the economy of Hay or the surrounding areas. There are dozens of similar examples, which the Assembly, the Government and local authorities can foster to ensure that there is diversity in our rural communities as much as in urban areas.

We must also understand that the other measures in the Budget—whether on the minimum wage, the reductions in income tax, the working families tax credit, the new deal and the increase in public dealing—have an impact on rural as well as urban communities. People in rural areas are as concerned as those in cities and our valleys about hospitals, the minimum wage and so on. The impact of the changes on all parts of Wales must be considerable.

Mr. Wigley: The Secretary of State rightly mentioned the importance of hospitals in rural and industrial areas. Is he aware that global warming, to which he has referred, poses a threat to development along our coastline, threatening Porthmadog hospital in my constituency and other developments because of the planning blight that it has caused? Can the Secretary of State confirm what additional resources will be allotted to Wales from the Budget to safeguard our coastline against the effects of global warming and allow reasonable development in our communities?

Mr. Murphy: No, I cannot provide precise figures, but I was interested to hear what the right hon. Gentleman said and I can assure him that I will discuss those problems when I next meet the First Minister. I shall return to public spending later.

Every single person in our constituencies will benefit from the new deal for the over-25s, and 50,000 people will be directly affected by it in Wales. As to the 10p income tax band increase, more than 1 million Welsh people will benefit. The increase in the working families tax credit will help 67,000 working families, and the increase in the minimum wage will improve the lives of 80,000. In this constituency, 2,611 Torfaen families benefit from the working families tax credit.

The Budget also helps families, for example through measures on maternity pay and leave, and paternity leave is now available for the first time. A quarter of a million Welsh families will benefit from children's tax credit, on top of the increases in child benefit that have already helped 350,000 Welsh families.

People who say that the Government have done nothing for pensioners will have to think again. The Budget implemented measures relating to what we already knew about in the pre-Budget review, but the impact now will be that all Welsh pensioners will benefit from a direct increase in pensions. On top of that, and in contradistinction to what the Conservatives are likely to do, pensioners have £200 in winter fuel allowance; the over-75s have free television licences; and there is the minimum income guarantee. By 2003, pensioners who suffer from the poverty trap in the middle range will be helped through changes to pensioner credit and income tax. If that is not a good package for pensioners in Wales, I do not know what is.

Mr. Elfyn Llwyd (Meirionnydd Nant Conwy): Despite all the good news, the feelgood factor has not spread to people throughout Wales.

Mr. Ruane indicated dissent.

Mr. Llwyd: Those people whom it has not reached are unlikely to come out and vote for Labour. The right hon. Gentleman should know that indirect taxation at 27 per cent. is higher than direct taxation. That is why the poor in our communities are hammered: they have to pay the same amount in indirect taxation as they do on their wages.

Mr. Murphy: On average, households will be £590 a year better off as a consequence of the Budget. Families with children will, on average, be £1,000 a year better off. I accept the hon. Gentleman's point, but indirect taxation has to be viewed in relation to other direct and indirect tax benefits. If we compare the average life of a Welsh person under the present Government with what it was under the previous Government—especially in the light of the number of people previously out of work who are now in employment—no meaningful comparison can be made in the quality of life. The Welsh people understand that. The hon. Gentleman is wrong to suggest that people will not appreciate that when the election is called. We shall have to wait and see.

Mr. Jon Owen Jones (Cardiff, Central): Does my right hon. Friend agree that Plaid Cymru is inconsistent on the rate of taxation? Plaid Cymru's policy is greatly to increase the taxes of Welsh people; incredibly, they also expect people in England to pay higher taxes to benefit Wales.

Mr. Murphy: I have consistently remarked on that inconsistency. It is a feature of opposition politics; over 20 years, we might even have performed the same pranks ourselves. Ultimately, public services can be improved only if one is prepared to pay for that improvement. Remarkably, our public services have been better resourced since last year's comprehensive spending review, while direct taxation has been reduced. The reasons for that are obvious to everyone; we are paying less in national debt than ever before and more people are in work. If there are a million more people in work, there is more taxation. The increased burden of taxation—although it is nothing like what the Conservatives said it would be—has occurred because of our success; more people are working and getting more money.

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