Budget Statement

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Lembit Öpik: Will the hon. Gentleman give way?

Chris Ruane: Will the hon. Gentleman give way?

Adam Price: I would like to engage in another esoteric discussion about the future policies of Plaid Cymru but we are discussing the Budget and its implications for Wales and I should like to continue.

Mrs. Jackie Lawrence (Preseli Pembrokeshire): Will the hon. Gentleman give way?

Adam Price: Yes, if it is about the Budget.

Mrs. Lawrence: It is. The hon. Gentleman has just said, ''While we remain part of the United Kingdom.'' In terms of budgeting, will he please answer the question that we have asked frequently and to which we have not received a reply: if its aim of separatism is pursued, how does Plaid Cymru envisage the shortfall between spending in Wales and taxation raised in Wales being filled when that funding no longer comes from the United Kingdom?

Adam Price: I am not interested—[Hon. Members: ''In answering difficult questions.''] Would it be possible for me to get a few words out before hon. Members intervene? I am interested in securing a settlement for Wales that delivers social justice for our people. That is the common ground that unites us, and that is what the debate should concentrate on. After this sitting, I will gladly have a more detailed discussion about our constitutional policy but this is not the time or the place for it.

Lembit Öpik: Will the hon. Gentleman give way?

Adam Price: In a minute, but not now, as I want to make progress.

The point has been made that in terms of national insurance contributions and the public sector, new Labour is effectively giving money with one hand and

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clawing some of it back with the other, which means that about a third of the extra investment may be bogus. As we heard, the extra health spending, is subject to the Barnett squeeze, which means that Wales's share of UK health spending will be cut year on year. The part of the UK that has the greatest health need will get the smallest health increase. That will mean a shortfall over the period we are discussing of about £100 million, which would be there if the year-on-year increase in England, and indeed throughout the UK, was matched in Wales.

Kevin Brennan: Does the hon. Gentleman accept that he is using statistics in the same misleading way as he has done before? He just said that Wales would receive the smallest increase of anywhere in the UK. He is deliberately confusing percentages and absolute amounts. In fact, people in Wales will get exactly the same amount per head as other people in the UK, starting from a higher base per head. Will he accept that?

Adam Price: The whole point is that we should not consider need in per capita terms. There has been a detailed discussion about that in Wales, as the hon. Gentleman will know. We need to recognise that the legacy of heavy industry is a problem. We have chronic health problems in Wales, which should be reflected in a higher per capita allocation, including in terms of the rate of increase. As two economists, we might lose our fellow Members if we continue in this vein. [Interruption.]

The Chairman: Order.

Adam Price: I was rather clumsily trying to offer the hon. Gentleman a compliment.

There may be a new honesty about this Budget, although that honesty has its limits, as Lord Rooker discovered recently in another place. In broader terms, I do not think that it is a break with Blairism. In economic policy the Government are still wedded to the principles of neo-liberalism and monetarism. There was nothing, really, for manufacturing, which has suffered from the Government's policy of a high pound, as well as from the global economic slowdown.

The research and development tax credit for large companies had already been announced. The Engineering Employers Federation was right to criticise the Government for introducing a volume-based tax credit rather than an incremental one, which would have been far more appropriate for smaller companies and in terms of supporting new research and development.

Some £50 million of the £400 million credit for research and development will be swallowed up by just two companies in the pharmaceutical sector, from which the Labour party has received several donations in the past. How will grants of £50 million to GlaxoSmithKline and AstraZeneca benefit the disadvantaged manufacturing regions? There were no measures of the sort that the manufacturing sector has been asking for in areas such as capital investment, coping with the climate change levy and improvement to the transport infrastructure. There was nothing on sterling and only businesses that are in profit, which is

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sadly not true of many in the manufacturing sector, will really benefit.

The national insurance changes will hit small businesses disproportionately, because a high proportion of their costs are staff-related. Many of them operate on very low margins indeed. The Secretary of State mentioned Consignia, which, it is true, is losing £1.5 million a day under this Government. It will now lose another £35 million to £40 million because of the changes. Corus has said that it will lose about £5 million as well.

The tax breaks for Wales's independent television production sector will end, adding about 10 per cent. to production costs, although the Secretary of State will be glad that films for theatrical release are to be exempted. I do not know whether he had a quiet word in the Chancellor's ear on that one.

There was nothing for tourism. Ireland has produced amazing growth in the tourism sector by looking creatively at VAT rating for the hospitality sector. Unfortunately, there was no discussion of that.

Mr. Wayne David (Caerphilly): Does Plaid Cymru believe that joining the single currency would help manufacturing in Wales?

Adam Price: I thought that I was talking about tourism. However, we certainly need a competitive rate for sterling, which will be one of the preconditions for entry to the single currency. It was said recently that the Chancellor believes that a 30 per cent. devaluation would be necessary. He has the tools to bring about a managed devaluation, which would have an amazing effect on our export potential, not just in manufacturing but in other key exporting areas. I would gladly join forces with the hon. Gentleman in order to get the Chancellor—

Mr. David: The question is whether to join the single currency before devaluation.

Adam Price: I will not respond to a sedentary intervention.

There was nothing for manufacturing. More than 40,000 jobs were lost in manufacturing in the four years from 1997 to 2000, according to the Government's own figures. That is 10,000 a year. Almost another 10,000 jobs were lost last year, according to the TUC. That makes 50,000 jobs lost in five years in manufacturing in Wales, which is an appalling record with which even the Tories could not have competed during their time at the helm.

Ian Lucas: Will the hon. Gentleman give way?

Adam Price: No, I will not. I have been very generous, and I should like to make some progress.

At the manufacturing summit, the TUC asked for £1 billion of aid for the manufacturing sector and received only £20 million for a couple of pilot projects. That says a lot about the lack of commitment and urgency that the Government have shown towards the crisis affecting the manufacturing sector. We give less state aid to our manufacturing sector than any country in the European Union other than Portugal. In

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Germany, aid is 32 per cent. higher than in the United Kingdom.

In a speech that she gave a couple of months ago, the Secretary of State for Trade and Industry said that she wanted to drive those levels of state aid down even further in the UK. She said:

    ''Demands on governments to bail out lossmaking companies become louder. The possibilities of using legislative power to prevent companies from laying off workers could acquire a new attraction.''—

Heaven forbid—

    ''But these pressures must be resisted.''

That shows the Government's true attitude.

I referred to the European Coal and Steel Community treaty. Again, we have a valuable opportunity to think creatively about the new treaty and consider how we could use it to create a mechanism for regional investment aid for the steel industry in areas such as South Yorkshire and south Wales. We need to take our steel industry up the value chain so that we do not face cheap competition from other areas or Europe or Asia. Unfortunately, that is not the kind of thinking that the Government have gone in for recently.

Kevin Brennan: Does the hon. Gentleman understand that, in his representation of the economy, he resembles an undertaker at a christening? He cannot allow that the population is rising because he sees so many deaths every day. The only economic recipe that he seems to offer is state subsidy of industry and devaluation. How would that help to maintain our prosperous economy? Would he recognise a real depression if he saw one?

Adam Price: The reality of the economic position that faces us, which is unfortunately part of a long-term trend under successive Labour and Conservative Governments, is that there is a huge shift of prosperity from the old manufacturing regions to the south-east of England. Clearly, as a Member representing a Welsh constituency, I see that as an issue of the utmost urgency. I see no reason to smile when I read in the Secretary of State's reply that 40,000 manufacturing jobs were lost in Wales in four years under this Labour Government.

Kevin Brennan: Pull the other one.

Adam Price: No—those are the actual figures for the fall in the number of people employed in manufacturing in Wales.

Ian Lucas: Will the hon. Gentleman give way?

Lembit Öpik: Will the hon. Gentleman give way?

Adam Price: I really want to make some progress, if I may.

Nothing in the Budget referred to operating aids. We are two and a half years into the objective 1 programme, and this was an historic opportunity for us to create a competitive advantage for our companies and to attract companies into Wales. We could have had the kind of fiscal packages that the Irish have used so successfully—but there was not a jot in response to the demands that the Labour and

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Liberal Democrat Administration have made in the Assembly. Their demands have fallen on deaf ears.

The north-south divide continues to widen and deepen. In a speech this month, the Secretary of State for Transport, Local Government and the Regions referred to the ''lottery of location'' that determines life chances in this country, but in the same breath he denied the existence of the north-south divide. He said:

    ''The challenge for the government is to eradicate these differences. Not by holding back the successful but by putting in place the measures necessary to lift all to the level of the best.''

The Government do not believe in regional policy and redistribution between the geographic regions of the UK. They are not prepared to use the tools that have been successful in the past in shifting the balance of economic prosperity.

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Prepared 24 April 2002