CORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 854-ix

HOUSE OF COMMONS

ORAL EVIDENCE

TAKEN BEFORE THE

WELSH AFFAIRS COMMITTEE

INWARD INVESTMENT IN WALES

MONDAY 5 DECEMBER 2011

RT HON DR VINCE CABLE MP, RT HON MRS CHERYL GILLAN MP and LORD GREEN

USE OF THE TRANSCRIPT

Oral Evidence

Taken before the Welsh Affairs Committee

on Monday 5 December 2011

Members present:

David T. C. Davies (Chair)

Guto Bebb

Geraint Davies

Jonathan Edwards

Nia Griffith

Karen Lumley

Jessica Morden

Mr Robin Walker

Mr Mark Williams

Examination of Witnesses

Witnesses: Rt Hon Dr Vince Cable MP, Secretary of State for Business, Innovation and Skills, Rt Hon Mrs Cheryl Gillan MP, Secretary of State for Wales, and Lord Green of Hurstpierpoint, Minister for Trade and Investment, Department for Business, Innovation and Skills, gave evidence.

Q489 Chair: A very good afternoon. Thank you very much, indeed, to all three Ministers for coming along here this afternoon. This is obviously an inquiry we are doing into inward investment in Wales. It might help us if you could just briefly tell us what you think the respective role is that each of you has within your ministerial portfolios in promoting inward investment in Wales. Perhaps we could start on the left with Dr Cable.

Vince Cable: Thank you, Mr Chair. To answer your question directly, we have a mixture of generic policies and very specific relations with big inward investors. In terms of generic policies, of course there is the UKTI-Lord Green will talk in more detail about that-and specific support measures are the Technology Strategy Board and credit measures which affect companies across the UK but are clearly of particular interest to you.

The other aspect of it is what I and my colleagues in the Department do in trying to build up a relationship with major potential or actual inward investors. I have been in Wales and to the overseas headquarters of, for example, Ford, Toyota and Tata, and tried to develop personal relationships with the people at the head of those companies. In several cases-as with Tata and, more recently, Toyota-the relationship the British Government have with these companies has borne fruit, and Wales benefits indirectly from that.

Mrs Gillan: Good afternoon, Chairman. The Wales Office has a slightly different role. as you know, we are a fairly small Department and a lot of the areas of trade and investment are delegated and devolved to the Welsh Government, but the Wales Office has a great role to play in bringing people together. Certainly, when I came into the Department, one of the first ports of call for me was not only with Sir Leon Brittan to talk about trade, but also with my colleagues to the right and to the left of me in making sure that they went down to Wales, both north and south, and visited as many people as possible, and I continue to do that.

We have another role, which is equally as important, and that is Wales’s voice around the Cabinet table. You will appreciate from some of the evidence you have taken during the course of this inquiry that elements such as ensuring that Wales goes forward on the infrastructure front and so on is exceedingly important. Also, we now have our own excellent contacts developing with diplomats and with other countries, and with organisations. Therefore, it is very much a co-ordinating and linking role-an important role-that you see for the Wales Office.

Lord Green: I am responsible for UK trade and investment performance overall and, specifically, I have oversight at ministerial level of both the UKTI and also of what we now call UK Export Finance-the former ECGD-and for the Foreign Office’s commercial diplomacy function. I see all of those three as kind of interlocking; they are not three completely separate areas of activity.

The strategy is, I think, fairly clear. Indeed, you heard some of this from Nick Baird the other day. We need to target our services particularly on SMEs. On the export side, we need to focus particularly on high-value opportunities overseas, which is partly about making sure we support the big companies already engaged in those, but crucially is about encouraging and finding ways for SMEs to become more active in those opportunities, too. We need to focus on inward investment, which is the subject of today’s hearings, and-Vince has already mentioned it-on strategic relationships at a very high level with the major inward investors as well as exporters.

Q490 Chair: Lord Green, you might have a point of view on this. You will be aware that the percentage of inward investment coming into Wales has been falling over the last decade or so. Do you think that that is partly due to global economic trends-for example, the rise of China, and the fact that we are now having to compete for manufacturing business with China and the south-east Asian nations, or is it entirely due to policies pursued by the Welsh Assembly Government and the Government in Westminster? Is there more that we can be doing back at home to reverse that?

Lord Green: It is a complex situation. Yes, of course, you start from the global situation in which competition for inward investment is becoming more and more intense with every year that goes by. If I may have a minute or two on this, I think it is worth making sure we start by looking at this from their end of the telescope, not from our end. I was in China last week, as it so happens, in Beijing and Shanghai. I met businesses from both cities, as well as the Governor of Anhui Province and various other quite important interlocutors there. It is very clear that when they look at outward investment-and they are busy encouraging Chinese companies to go global-they look first at Europe. The first question they ask themselves is, "Should we be investing in Europe?" Assuming the answer to that is "yes" or "maybe", they then say, "Where in Europe?"

In one case, for example, I had a conversation on Thursday with a company that is looking at investing both in setting up a European headquarters and also some manufacturing operations within the European Union, or within Europe, because the three countries they are looking at are the UK, Switzerland and Germany. They start from that perspective. If they end up majoring on the UK, as I hope they will in this particular case, they then ask themselves, "Where do I go within the UK?", and the answer will be different from the perspective of the head office and from the operating unit, for obvious reasons, and the answer will possibly be different again if they are thinking about R and D. In that particular case, R and D is not a big deal.

The only point in saying all that is that if we are going to have success in this very competitive world, we have to start from that end of the telescope. What does it take to attract inward investment in the circumstances when there are dozens-if not hundreds, certainly dozens-of other countries competing for that same flow of outward investment?

Q491 Chair: Is the focus therefore on expanding existing Chinese companies by setting up a branch effectively within the UK, Germany or Switzerland, or is it on buying existing companies within those nations, which may do a similar thing to the Chinese company, and basically take them over?

Lord Green: I think you will see examples of both those things, plus greenfield investment, which the company I have just described would be involved in, plus also R and D partnerships. So I think there are different ways in which both the Chinese and, of course, other countries think about investment. In that context, at the UK level we need to be ensuring that we have a competitive offer, obviously in terms of tax, the story about regulatory environment, the skills base, costs and infrastructure. These are all the kinds of criteria that they weigh up. I have found that companies do this quite systematically. It is almost as if they are building up a grid: here are the criteria, here are the countries and we are scoring each country, and we come out with a decision in the bottom right-hand corner.

Q492 Chair: Lastly from me to the Secretary of State. Is Wales’s performance in terms of getting inward investment something that is replicated across other regions of the United Kingdom, or is Wales doing particularly badly compared with other regions at the moment, and compared with how it was 15 years ago?

Vince Cable: It seems to be doing relatively badly, but you can look at the trend in different ways. It reached a peak in terms of attractiveness for inward investment round about 1990-91, when much of the rest of the UK was in some trouble at the peak of that boom before it bust. It has since declined and has plateaued for the last five years or so. I think the answer is that it has done relatively badly in recent years.

Mrs Gillan: It is not always straightforward. The figures released in July showed a fall of 29% in new jobs created by inward investment projects into Wales, and that Wales contributed only some 4%, that is 38 projects, to the number of FDI projects brought into the UK in 2010-11. That emphasises the need for both the Welsh and the UK Governments to work closer together to look at what we can do to make sure that the offer from Wales is so much more attractive, because I believe that there is a great future, and we can achieve that by working together.

Q493 Mr Williams: I want to turn the clock back a little and reflect on the fact that in the past, Wales’s offer to inward investors was based on grants and low costs in terms of land and labour. How relevant are those inducements now to inward investors? Over and above what Lord Green said about the importance of research and development, what are the new inducements? If we are looking through that telescope, what is the whole package that people are looking for and how relevant are those historical inducements?

Vince Cable: All those factors are relevant. Indeed, one of the big, new departures in policy has been the creation of enterprise zones. Wales is proceeding with five of its own, and they are trying to differentiate locations through taxation, capital allowances, business rates, in this case, and flexibility in planning policy. Those are the issues that come to mind.

As Lord Green said, most companies have a matrix of things they are looking for and there is a limit to the extent to which any Government can lavish grants and tax reliefs. It is probably fair to say that the boom of inward investment in Wales 20 years ago was accompanied by fairly substantial grant assistance. It was expensive, and many of those companies drifted away, because it was temporary support.

Mrs Gillan: We have to make sure that we have the right situation for companies to consider Wales as a destination. You heard some of the criteria from Lord Green, but inward investing companies will be looking for skills and capacity, and infrastructure-broadband has been particularly important. The indications are that we have had such good inward investment in the past that we can build on that footprint and move forward. For example, I know that Tata Steel has been looking at helping some of the SMEs in its supply chain to look at what opportunities they can have in India. There is a lot to be done on building on the existing footprint of those companies that came in.

The Welsh Government have a good policy of looking after the anchor companies, which, again, lends itself to looking at a good, attractive policy for inward investors. There is always more that can be done, but I am certainly optimistic about the signs.

Lord Green: Looking forward, the role of the universities is becoming more and more important-not just in Wales, but everywhere. Their role as centres of R and D that are closely connected with the business environment is becoming increasingly prominent in investors’ decisions, particularly in advanced manufacturing, in life sciences, in ICT-even in the creative industries. If one is looking forward as opposed to looking backwards, it is very important to work to ensure that those links are as close and constructive as possible. I think Wales will have a good story to tell.

Q494 Mr Williams: I am glad to say that I have two universities in my constituency-that’s the plug-and building those partnerships is critical.

There has been a debate in Wales about the relevant balance between larger inward investment projects and support for SMEs. Secretary of State, we have heard about the drive for exports from SMEs, what is your view on the balance between the two? Again, from an anecdotal, constituency point of view, I have the largest proportion of small businesses per head of population anywhere in the UK. There are a lot of small businesses that need and want support. What will you be doing for them in the context of the big debate?

Vince Cable: Well, I would certainly argue that in order to build up sustainable forms of economic growth SMEs are absolutely critical, but not SMEs in general. A lot of analysis has been done-the CBI has done a lot of this work-that suggests there is a particular group of the Ms rather than the Ss. They are called gazelles and are the 10,000 companies that are SMEs with a real ambition to expand. They are British based. That is the group of companies that are probably the most crucial to growth. Obviously, inward investment is an important part of the mix, but no economy can be dependent on that; it has to be domestically based. I was looking at the figures within Wales and I noted that Ceredigion had a relatively low share of inward investment relative to its own domestic small companies. One can understand that.

Mrs Gillan: May I make a point on that because it is quite important? The UKTI has a programme of market visit support that provides assistance to new-to-export or new-to-market SMEs visiting overseas markets. Previously, the Welsh Government made use of the UKTI’s funding, which was up to about £50,000 per annum, but, over the past two years, they have not taken up that offer. It is only a small amount, but it is important in the greater scheme of things. As it had been taken up previously, having missed doing so for two years, I hope that the Welsh Government and SMEs will be looking to take advantage of that.

Chair: Obviously, there are two Secretary of States here and so we are confusing things a little bit. I better gently move things on.

Q495 Jessica Morden: You referred to building on the footprint of companies such as Tata Steel. I would like to ask you and the Business Secretary what you are doing to protect the investment we have already got. In my constituency last week, Tata Steel mothballed the hot strip mill, with the loss of 115 jobs. A month previously, 70 jobs had gone in a construction products part of the business. The company obviously cites low demand for steel, high energy prices and things like the future carbon floor price. You have obviously tried to adjust some of those things in the autumn statement-although crucial details remain unclear for the company-but I am keen to know what kind of immediate help you can offer to companies to protect the investment we have.

Mrs Gillan: May I just start with an overview in particular relating to Tata Steel? Last week’s situation has happened before and it is a mothballing, thank goodness. We are hoping to look to the future and to that opening again at some stage. My colleague came down and visited Tata Steel alongside me at a very early stage. Of course, the big issue was to look at the carbon intensive industries particularly, but also at how we can take forward the investment. We have worked together very successfully and my colleague will have a lot more to say on the detail of that.

Vince Cable: Various things. First of all, Lord Green and I have developed a personal relationship with the top people in Tata. It is the biggest overseas company investing in British manufacturing, not just in Wales. It is therefore a very important relationship. I think Tata is positive about the UK. In terms of Port Talbot, which is the biggest installation, it has made a big commitment. The fourth blast furnace replacement was a very big commitment by the company and all our conversations with it suggest that it regards its investment in Wales, particularly in Port Talbot, as massively important to its group. It has put a lot of capital in already and is committed to doing more.

There are two issues now. One is the energy intensive industry problem. When the Secretary of State for Wales and I visited some months ago, that point was made very strongly. Actually, that visit, as much as any other factor, triggered the detailed negotiations with the industry about the kind of support it needs to offset higher costs. The package we produced in the autumn statement is very substantial, at least as regards the costs of the EU ETS and the carbon price floor. There are issues still remaining in terms of the electricity market review and what that means for energy intensive industries, but we have gone a long way to meet the concerns expressed.

As far as Llanwern is concerned, I discussed-as the Secretary of State for Wales did last week-with Dr Köhler why that particular mothballing had occurred. He was quite clear that they have been hit very badly in terms of market demand and what is happening in Europe. They have taken a measure that replicates what they did in the middle of the recession in 2008-09, namely using flexibility agreed with the labour force-mothballing rather than closure. In general, this is an exemplary employer that is very considerate towards the labour force and tries to handle these situations as sensitively as possible.

Q496 Jessica Morden: My point was that a lot of these things are not going to kick in until 2013, such as the carbon floor price and the help that you are offering in the autumn statement. I have one more question from a local perspective. The Army specialist vehicle programme will be very valuable to companies such as General Dynamics, in terms of both highly skilled jobs and future exports. Are the Government committed to delivering that programme?

Mrs Gillan: I have spoken to both General Dynamics and the Ministry of Defence. We have been committed to delivering that programme, and we continue to consider that that is a very valuable part of the Defence portfolio. We have a large Defence footprint in Wales, and I will be having some more discussions with the Ministry of Defence on Scout shortly.

Q497 Nia Griffith: Lord Green mentioned earlier how companies use a chart to tick off which countries score on which features. In the joint submission from the UKTI and the Wales Office to the Committee you mention four areas where Wales may have a competitive advantage: skills, being close to the rest of the UK hubs in Europe, property prices and quality of life. To what extent do you think those criteria attract inward investment? Do they rate highly in what the companies choose? Does the UKTI encourage investment in Wales and discussion of the reasons why companies may or may not come in?

Lord Green: The criteria that you have just mentioned are helpful, but they are not sufficient on their own. Wales sits within the overall UK tax structure, and tax is clearly an important factor for many investors-not all, but many. Infrastructure is a broader issue than just Welsh infrastructure, and the state of Heathrow airport is one thing that occasionally comes up in conversations. Those things are helpful.

To what extent does the UKTI help? If I can look forwards rather than backwards-I am still relatively new in this role, although after 11 months that is perhaps wearing a bit thin-there seems to me to be goodwill on the part of both the UKTI and the Welsh Government towards making a constructive and forward-looking approach to marketing Wales. We are in a competitive environment, and there is no country that has a completely distinctive set of attributes that will win investment without further ado; you have to market the proposition. Marketing Wales as part of the UK is clearly a job of the UKTI overseas, as well as the way in which it processes inward applications. You heard from Nick the other day about the way in which the hub for investment possibilities is managed centrally and made available to the Welsh Government, as to other devolved Administrations and regions.

The branding is important. In some senses, I hate to use that terminology because it risks sounding crass, but it does matter. Brand Britain is something that means something internationally. Wales has a brand that there is potential to invest in. By invest I mean not primarily put money behind, but build on. Wales clearly has an identity. Lying behind it are the kind of things you have just mentioned: the quality of life, the attractive environment and the university base in particular areas, so the brand is not something that sits up in the atmosphere unconnected with real facts. It is important to market the concept of Wales, however, and that is part of the UKTI’s responsibility.

There are some interesting things to build on, looking forwards. I am not sure that, looking backwards, we have necessarily made the most of these things. For instance, Wales attracts some 6% of all the overseas students that study in this country, so against a population base of 5% of the total it is doing better than the UK average. There are 24,000 overseas students at any one time, and they are the basis for an alumni network that can be worked. At its best, I have seen that done very effectively. Anecdotes are only so valuable, but I know of a very senior official in the Shanghai administration who did her English language training in Cardiff, and indeed speaks English with a slight Welsh accent, and that is the kind of contact that is well worth nurturing in the short, medium and longer term. That is one example, and the Welsh diaspora is another one.

The Scots do a brilliant job with global Scots of working their own diaspora. I think that Wales could work its diaspora. I was in Korea two weeks ago. The Chairman of the British Chamber of Commerce there is a Welshman-very proud of the fact, too. It is an example-again, by anecdote-of how you can enhance the brand, and I think that that is well worth doing in this highly competitive international environment.

Q498 Geraint Davies: Taking that forward, this question is again for Lord Green. In passing, may I give thanks to Nick Baird, who was in Swansea with his team recently with Swansea University? Swansea University is very focused on Tata and industrial R and D. We have another university-the Met-which is the largest producer of SMEs of any university in Wales. Presumably, the UKTI can link into something like Swansea Met and help those SMEs grow and so on, but I really want to ask about branding.

Beneath the Wales brand, you might have something like the Swansea brand, which is known now to 500 million people thanks to its premier league status. A particular event we have coming up is the Dylan Thomas centenary in 2014. That in itself is a brand, and obviously Dylan Thomas was born in Swansea. How creatively could the UKTI help to build all the opportunities around that Dylan Thomas event, not just for Swansea, but for Wales and the UK, in the way that the Ryder cup a few years ago did, bringing millions of pounds to Wales? What are your thoughts on that?

Lord Green: First, on the general point about sub-brands, if that is the right phrase, I think there is absolutely nothing wrong with the UK saying to itself that it has a UK brand-or brand Britain-and a Welsh brand, in the context that we are discussing this afternoon, and individual brands within that: Cardiff, Swansea and no doubt others. Again, I can think of other examples around the country-Liverpool-and Shanghai is fresh in my mind because I have just been there.

Geraint Davies: Let’s go back to Swansea.

Lord Green: Let’s stick with Swansea.

There is evidence, without naming them again, that you can raise your profile very strongly. Forgive me: the population of Liverpool is around about 300,000-I may have the number slightly wrong-and its visibility in Shanghai, which is a city of 14 million, is really quite high, because it has worked the brand. Therefore, I agree that there is plenty of scope for promoting individual city images. In the context of Dylan Thomas, I am tempted to show off by quoting the only lines of Under Milk Wood I can, but I will not.

Geraint Davies: Go on.

Lord Green: "It is Spring, moonless night in the small town, starless and bible-black".

I think that it is an interesting idea. Dylan Thomas would be well known in America. I am not sure how well known he would be in Asia-I just don’t know. It is an interesting thought.

Q499 Geraint Davies: I know that President Jimmy Carter is a great fan and is supporting Dylan Thomas’s house. The issue is whether networks can be built two years in advance, so that tour operators in America put together packages to go to South Wales, including Laugharne and Swansea and so on. Could the UKTI help? Rather than waiting for the event to happen and not taking full advantage, can there be help in supporting infrastructure development, including private sector investment, and international linkage to make something bigger than just an event in Swansea-a Wales and a UK event?

Lord Green: I imagine that that is something the Welsh Government ought to lead on, but I think that the UKTI should be there to help. If this is a significant inward investment opportunity built around a particular cultural event-the Olympics is a major opportunity of that kind-I think that the UKTI should certainly be ready to help the Welsh Government, who would clearly want to take the lead on this kind of proposal, in marketing the proposition overseas and doing whatever it is reasonable to do.

Q500 Geraint Davies: Obviously, when the torch comes through Swansea, I am hoping that they will have a Dylan Thomas T-shirt on. I hope the press got that.

If I can move on to infrastructure, obviously connectivity is very important. I want to raise two issues: first, the extension of the electrification to Swansea, which we are very keen on; and, secondly, the Severn bridge toll and so on. Obviously, we want to do everything we can to be able to get goods to market quickly, and to get inward investment. I do not know whether any supportive or positive words are going to be said about the bid towards electrification to Swansea and reducing the costs of transportation. After all, the Humber bridge tolls went down, and tolls are up on the Severn bridge.

Mrs Gillan: First, may I just congratulate you on what you have been doing on marketing Swansea? Reports have reached me.

Geraint Davies: I will send you a T-shirt.

Mrs Gillan: I hope you will. On that, we will see what we can do to assist. I am sure that our embassies abroad and others will be interested, because Dylan Thomas is, after all, an international figure, and well known. As America is such an important market for Wales, it will be a good opportunity, because it has such a high recognition factor.

Briefly, on the electrification to Swansea, as you know, we have kept that option open, and I am looking at electrification of the valleys lines; in fact, I put in another business case on that recently-last week. I am still optimistic and keep pushing for that. The door has still been kept open; it has not been closed on the electrification to Swansea. I think that that is really key.

Vince Cable: On your infrastructure question, broadband is obviously particular to that, and this has been rolled out. There was more in the autumn statement. Cardiff is one of 10 cities that will have a very dense, superfast broadband connectivity.

Q501 Geraint Davies: That is welcome but the concern in Swansea, as the second city, is that with the railway, the broadband, the electrification and so on, everything stops at Cardiff. That is the fear, but obviously we want to reach out beyond that.

Mrs Gillan: On the Severn toll bridge, there have been discussions on improving the road infrastructure in south Wales. What we said in the autumn financial statement is that if the Welsh Government come forward with sufficient, or some elements of, capital towards those improvements, we will look at what we can do from the UK Government end, including looking at what happens to the Severn tolls after 2017.

Chair: Geraint never goes gentle into that good night, but there are many people on this side, including Jessica, wanting to come in.

Q502 Mr Williams: On the broadband point, my colleague has said that the barrier ends somewhere near Swansea, and I am glad that you mentioned broadband, Secretary of State. I mention it in the context of mid and west Wales. If we are going to develop those small businesses, it was very alarming to hear from Nick Baird, when he gave evidence to the Committee, that a prerequisite to anything in terms of growth is adequate broadband provision, when in many areas, we do not have broadband provision at all.

Mrs Gillan: We have done a study of what is needed for the rural areas, within the Wales Office. The Parliamentary Under-Secretary of State carried it out on our behalf, and this figured highly. We have £57 million going into Wales in terms of broadband, but the city region money for broadband was money over and above that, so we are hoping that this will be rolled out.

Q503 Guto Bebb: In the submission you provided, you mentioned skills as being a competitive advantage that Wales has. I take it that that is a comparative figure, but who is the comparison being made against?

Vince Cable: I have not made the comparison, so I cannot answer your question directly, but in terms of the underlying premise, it clearly is crucial. This is an area where devolved powers kick in. We have very aggressive progress of apprenticeships, but that is in England. I cannot make comparisons with exactly what the Welsh Government are doing, but it is obviously crucial.

Mrs Gillan: Obviously, skills are very important. We have some tremendous skills in Wales, not least in north Wales, as you know, with the manufacturing hub up there, and materials. We have a first-class apprenticeships scheme based on Deeside college as a hub, which we are very keen on. It therefore makes that area very attractive, as far as that type of activity is concerned.

Q504 Jonathan Edwards: You both mentioned the autumn statement and the capital investment programme that was announced. That was £30 billion; £25 billion coming from pension funds and £5 billion from the Treasury. The only element that is Barnettised is the Treasury, which means we are only getting £216 million, so what will you do to make sure that we get the £1.25 billion that we should be getting from the pension element?

Vince Cable: Well, as you say, the Barnett consequentials for capital I think are £216 million, but the large sums of money that are talked about relate to private investment and big infrastructure projects. What has happened is that the Government have reached a memorandum of understanding with the big pension funds and insurers, where we know there is currently a lot of money locked up and looking for a secure home with a decent rate of return. How that money is spent will depend on whether good infrastructure projects are available. You presumably have in Wales a kind of inventory of your top priority infrastructure projects, and if they are good projects and if they produce a return, they will attract some of that money.

Q505 Jessica Morden: A question for the Secretary of State for Wales: you mentioned earlier that your role was to bring people together. In terms of inward investment, who have you brought together and what has that resulted in?

Mrs Gillan: Starting off right from the beginning, I was bringing my colleagues into Wales and introducing them, but I was working with the previous Government and the previous Minister for Business on looking at what we could do jointly in terms of highlighting the offer we have in Wales. However, for example, just simple things I have been doing have included working with the Bangladesh chamber of commerce, and, indeed, I encouraged and inspired the first visit of a whole group of Welsh companies to Bangladesh. I have been looking at how we can work with the UKTI from the Wales Office, and we worked together on the DSO conference, which was very successful and which was held in south Wales. I am also obviously seeking to work with the new Minister for Business, and I hope that we will have a fruitful relationship moving forward to see where we can jointly assist. Those are just a couple of examples.

Q506 Jessica Morden: So far, what have been the achievements of the Business Advisory Group that you have set up?

Mrs Gillan: The Business Advisory Group was set up right at the beginning so that we can understand better the business climate in Wales and get feedback from a variety of businesses in and across sectors. It has been able to inform the Prime Minister’s business group, and the outcome from his business group, about what is happening in Wales. In fact, it has been addressed by both my colleagues sitting either side of me, and we are going to be looking at FDI specifically next year, because one thing that is important is to allow the new Welsh Government to settle down and to see against what background business in Wales is working.

Q507 Jessica Morden: How many inward investors have you met recently in your time as Secretary of State?

Mrs Gillan: We have a huge number of inward investors. I can provide a list for you-from Airbus to Tata and from General Dynamics to Sony and Sharp-so it is a large number that I have met.

Vince Cable: In terms of the different models of engaging with investors-other than at the high level that Ministers do in London-there are essentially two approaches. One is the state agency, as we had with the English RDAs, which still exist in Scotland and Northern Ireland. Alternatively, there is a business-led approach, as we now have with the English LEPs. Wales does not have either, but this structure that the Secretary of State has established does provide business leadership in a slightly different way.

Q508 Mr Walker: The Welsh Secretary mentioned earlier the importance of the different Governments working together, and I am interested in how closely the Wales Office and the UKTI work with the Welsh Government at the moment. How does that work day to day?

Lord Green: I think it works quite well now. I am not sure that that was always true looking backwards. You have heard from Nick Baird, and he was down in south Wales recently. I am due there early in the new year and that will be my third visit since taking on the task. As I think you heard from Nick, they have appointed a relationship manager in Gareth John, who lives in Wales and who-you can tell from his name-has a resonance with the Welsh image. There is to be a major event in Wales for SME exporting, which follows on from the national event that we recently held in London, and we are rolling that out around the country. I am hoping that Edwina Hart will chair that, and if invited I will be delighted to go and be a keynote speaker, as I will be doing for the English regions and for Scotland-

Q509 Chair: Did you say that she is going to chair it?

Lord Green: I am hoping. We are still in discussion about pinning down a date for the event, but it will happen some time in the reasonably early new year. I am working on that assumption. That, I think, is an important opportunity to engage not the SMEs themselves so much as their supporters. In Wales, as in everywhere else in this country, our task is to get more SMEs looking at the international markets for all the reasons we understand. That involves clearly the Governments doing things right in terms of support so it is the responsibility of the Welsh Government and of the UKTI, making sure that those work well together. But it is also, critically, a matter of engaging banks, lawyers, accountants, chambers of commerce and trade associations in the project as well. That is what that conference is about. As I say, we are rolling that out around the United Kingdom. I am hoping that Edwina will host that.

Q510 Mr Walker: You mentioned Nick Baird’s evidence. Disappointingly, we have had written evidence from the UKTI which mentioned that the meeting he’d proposed with the Welsh Business Minister did not go ahead on 24 November. I was wondering whether the three of you have met with the Welsh Business Minister and, if so, how regularly.

Lord Green: I have not.

Vince Cable: I have not.

Mrs Gillan: I have met with the Welsh Business Minister. I have had one meeting and I was hoping for quarterly meetings, but I think we have arranged now to have meetings every six months if the Welsh Minister considers that there is something we need to talk about. However, it is really important because there is concurrent responsibility between the UK Government and the Welsh Government on trade and investment in terms of the UKTI and the Welsh Government. It is definitely my view that we can strengthen joint working and strengthen the possibilities of putting the best possible case forward for Wales.

Certainly, I have met with Gareth John, who is a former senior member of the WDA and lives in Wales, but I acknowledge that there is scope and certainly a willingness from this side to do more. As Lord Green knows, I was keen to see whether there was any possibility of enhancing the UKTI’s presence in Wales, particularly because I know through the Business Advisory Group and through many other contacts in the business community that they have often been uncertain where to call on and whom to talk to for advice both on exporting and on attracting inward investment. I hope that we will be able to improve that co-ordination over time. But let me stress, the Welsh Government is only new in office. It has now got a lot of money coming to it. We have secured a good deal for the Welsh Government at UK Government level and it now has the powers, and I am hoping very much that we will now make more progress.

Q511 Mr Walker: Just for the record: Dr Cable, I saw you shake your head. I don’t think you have had a chance to meet the Welsh Business Minister.

Vince Cable: No.

Q512 Mr Walker: And Lord Green likewise?

Lord Green: No. I have not.

Q513 Chair: Have you offered to meet with him?

Vince Cable: Not specifically. I have had correspondence, inevitably, on UK-level matters that relate to Wales.

Q514 Chair: For the record, there would be no problems on this side?

Vince Cable: Absolutely not.

Q515 Chair: If a meeting does not take place, it is not through any lack of enthusiasm?

Vince Cable: There is no lack of enthusiasm.

Lord Green: We would like meet. We look forward to that.

Q516 Jonathan Edwards: When we visited Germany and met the German Trade and Investment, they were specifically tasked with helping geographically to rebalance the economy, primarily because of reunification. Despite reunification, they are a more equal state geographically than the British state. Therefore, in evidence the UKTI said that they were willing to look at that but it would take a political decision to say that you had to target investment to the poorest parts of the state. The UK Government have a strategic objective geographically to rebalance the state, so are you going to look at that or are you still going to maintain this free-for-all approach to inward investment?

Vince Cable: I wouldn’t describe it as a free-for-all approach. We are trying to attract as much inward investment as possible, particularly when it contributes to rebalancing the economy, and that is both sectoral and geographic. I am not sure that setting targets is the best way of doing it, but certainly if big inward investors-particularly those from emerging markets where much of the growth is now in inward investment-were to want to come to Wales and express an interest, we would certainly want to encourage that. As you say, rebalancing is a big strategic objective.

Q517 Jonathan Edwards: If you are not going to set targets, how will you rebalance the economy geographically?

Vince Cable: As Lord Green said at the very beginning, we have to look at this problem through the other end of the telescope-the way that inward investors look at us. We cannot go out to China, India or, for that matter, the United States and say, "Come forward all those people who want to invest in the north-east of England or Wales, and the rest of you step back." That is not the way it happens. There is a series of processes, and we are trying to attract people interested in investing in Europe and in the UK. We do our best to encourage them, and if there is a Welsh dimension to it, and if it is a strategically important industry, advanced manufacturing for example, obviously we work very hard to attract them.

Q518 Jonathan Edwards: Several witnesses have told us that in recent years Scotland has been outperforming Wales in attracting inward investment. Why do you think Scotland is doing far better than Wales at the moment?

Vince Cable: I am not sure that is necessarily true. Again, as Lord Green said earlier, there are areas where Wales has world-beating companies, lots of them based on inward investment-aerospace, motor vehicles and life sciences among them. There are the creative industries around Cardiff, a lot of which are inward-investment driven. I would not be negative. Scotland has one particular advantage in that it has had a very big offshore oil and gas industry. As I saw a few weeks ago, there is a very well developed supply chain around Aberdeen, much of it inward investors who are attracted by that particular piece of geography.

Q519 Karen Lumley: I apologise for being late. I had a question in the Chamber.

Do the Secretary of State for Wales and Lord Green feel that the UKTI or the Welsh Government are better placed to promote Wales to overseas investors? Do you think they are duplicating their work?

Mrs Gillan: I cannot say whether they are duplicating their work, because I do not know extensively what the plans of the new Welsh Business Minister are as yet. I think there is joint responsibility, as I said earlier. The UKTI is charged with all parts of the United Kingdom, and Wales is part of that United Kingdom. We need to make sure that Welsh strengths and capabilities are covered in our national offer by the UKTI. In the way the UKTI shares with the Welsh Government its portfolio of existing investors and the way it makes sure that the pipeline is transmitted to members of the Welsh Government, there are some statistics about the number of individuals in the Welsh Government who have access to the UKTI data sets, which have not been taken up to the fullest extent recently. I think that could be improved on but it is a question of joint working, which, from my perspective and from what I have observed, makes the offer from Wales stronger.

Lord Green: I do not think there is a need to fear duplication, but there clearly is a risk of it if you do not organise it properly. Wales actually has an advantage over some regions of England, but it does have a separate-I used the word earlier, probably before you came, and in some senses I am almost reluctant to use it-brand, image, let’s say. Wales has an image, and building on that through Welsh Government representation overseas is helpful.

That goes back to the previous question. One of the ways in which you work your best to ensure that Wales gets its fair share/more than its fair share of inward investment is to promote the image. I think the activities overseas clearly need to be co-ordinated. There are six Welsh Government offices overseas, two of which are co-located. My own view, for what it is worth, is that, in general, co-location is a good thing because you can then trade on each other’s strengths. Putting two offices in two different parts of a city is not the best way to organise the effort. Wales needs to, as it were, piggyback on the activities of the UKTI, but it has an opportunity in so doing to reach further than it ever could on its own and probably to do better than if it were just the UKTI. So I do not feel that duplication is a risk, but it does need to be managed.

Mrs Gillan: May I make one further point? The UKTI invited the Welsh Government to contribute responses to 68 investment leads last year. Since May 2011, 24 UKTI projects have either been transferred to Wales or have expressed an interest directly in Wales. It is obvious to me that the complementary activity pays off in terms of prospects for Wales.

Q520 Karen Lumley: Have UKTI offices overseas experienced budget cuts?

Lord Green: There were some budget cuts in the spending review, but actually the Chancellor’s autumn statement has given us extra resources, which will be used for different sorts of things. Some will be used for those medium-sized companies that the Secretary of State for Business, Innovation and Skills referred to a few minutes ago, and some will be used for investment and overseas support.

Q521 Chair: Lord Green, when you were running HSBC, were you aware of the Wales overseas offices, for example in China? You must have been in China a lot, and you would have been aware of the UKTI.

Lord Green: If I am honest, I am not sure that I would have been, and I am not sure how aware I was of the UKTI, which maybe goes to a wider question of how good a job either Government, jointly and severally, do in ensuring the services of Government in its general sense-

Q522 Chair: What about the WDA?

Lord Green: The WDA clearly did have a strong brand. One of the most obvious points is that this whole effort has twice undergone a substantial reorganisation in the past few years. I think it is coming out of that now. It is obvious that you need a stable environment within which to do the best possible job.

Q523 Geraint Davies: Self-evidently, Wales has only got 3 million out of 60 million people in the UK, so it cannot do it on its own. It is unclear that we are getting the same message from Lord Green and Cheryl Gillan. There was something in the press today from Cheryl Gillan saying: "You’ve got the power, now do something", implying that Wales should just get on and do its own thing.

Wouldn’t you agree that it is critically important that there is a partnership approach, that we get our fair share of the UKTI, and that any tax that emerges from wealth creation from that goes back to Westminster anyway? Obviously the money to Wales has got to be given through the budget formula. Have I got this right? I think I might have misunderstood the quotes in this article. What the Secretary of State is presumably saying is that we should work together in partnership for a stronger Wales, not just get on with it, you have the power.

Mrs Gillan: Mr Davies, I am not responsible for writing the headlines for Western Mail. If you delve slightly deeper into the article and some of the direct quotes you will see that I am very encouraging and willing always to work in harness together with the Welsh Government. They are quite rightly, in devolution terms, responsible for certain areas. For example, in this area I know that the Business Department in the Welsh Government is rebuilding, and I think there are some concrete joint working opportunities that we can take forward, particularly on the UKTI front. I think my colleagues will attest to the fact that right from day one I have been keen to ensure that that joint working is fully realised.

Q524 Geraint Davies: Can I ask Lord Green, in a nutshell what should be the USP focal point in marketing terms for Wales?

Lord Green: I am not sure about the "U" bit of that. I don’t think there is one single headline. Clearly, the universities-we have talked about that before. There is an existing base of major investing names in Wales. That is both reassuring to other inward investors, as well as a set of relationships to work on in their own right. The proximity to London is a helpful part of the case for Wales.

Q525 Geraint Davies: Presumably also, quality of life and Dylan Thomas, of course.

Lord Green: Quality of life and Dylan Thomas.

Vince Cable: May I reinforce the point about joint working, with an example that partly answers Jonathan Edwards’ question? One of the success stories for inward investment in the past few weeks has actually been a big Michelin investment in Dundee. That happened primarily because the UKTI first established contacts early in negotiations at an exhibition in Paris. That was passed on and Scottish Enterprise became involved in the detail of the negotiation and the funding. Such is the politics of this that both sides have claimed credit. Actually, the truth is that without both sides-the UK level and the devolved Government level-that would not have happened as smoothly as it did.

Q526 Guto Bebb: Dr Cable, in 2010 the Welsh Government announced that it would focus resources on a sector-based, strategic approach to business support. Originally, six sectors were chosen for support, but that was expanded by a further three in September 2011. Are the nine sectors chosen by the Welsh Government the right sectors for Wales?

Vince Cable: Certainly at a UK level we do not try to specify sectors in quite such a detailed way. There is the old jargon about picking winners. Certainly, while I have been head of the Department, we have not gone down that road. What we do have is a commitment, more broadly, to rebalancing the economy. That means a greater emphasis on manufacturing, particularly advanced manufacturing, creative industries and business professional services. We have not tried to break that down to a lower level of sectoral specificity and we do not intend to do so. To the extent to which someone has to make strategic judgments, we leave that to bodies such as the Technology Strategy Board. Those bodies make choices on our behalf, rather than doing them politically.

Lord Green: It is perhaps worth adding that the six sectors that BETS had identified are pretty coterminous with a number of the sectors that the UKTI has arranged itself around, which I think is a case of great minds thinking alike. The new three are very new. The UKTI will have to think about how it responds in its way of doing things to those three new sectors in order to support them properly.

Q527 Guto Bebb: I think you have already responded to my second question, which was to ask whether, when the UKTI goes out trying to market Britain, it targets specific sectors.

Lord Green: It depends. The UK economy is very broad-based. What you certainly don’t do-in a sense I am repeating what the Secretary of State just said-is identify a small number of so-called winners. Yet it is obvious that in some major emerging market opportunities, where there are high-value opportunities where huge infrastructure projects are being developed in places such as China, India and Saudi Arabia, there are particular sectors that are relevant to that if you are trying to engage more businesses. For a lot of these infrastructure sectors, you are obviously looking at engineering services, contracting, project design and those kinds of activities. The sector gets defined by the opportunity there. I do not think, however, that we should go out with a general proposition that that UK is only interested in three or four or five sectors, because, actually, we are quite a broad-based economy.

Q528 Guto Bebb: Dr Cable, we have heard a lot during this piece of work about how successful the WDA was in the late ’80s and early ’90s, but there was also criticism from other parts of the United Kingdom. At that point, I remember well people saying that Wales was buying projects at the expense of the rest of the United Kingdom. My question is: do you think it is possible for different regions within the UK to compete for work overseas, or would that be counter-productive?

Vince Cable: I think that I would be worried on two levels. The first is revenue, if you get into a revenue bidding war-that relates to the wider argument about corporation tax in the UK-and the second is duplication of effort. One of the reasons why we made the decision to move away from RDAs in England was because a lot of effort was going into duplicate promotional work overseas, which was not terribly sensible. That is an important qualification and why it is important not to waste a lot of energy and money in competition of that kind. As Lord Green has been saying, Wales has an identity, it has a brand and it has distinctive positive things to offer. Obviously you have to try to sell that.

Q529 Karen Lumley: Secretary of State for Wales, you have talked a lot about working with the Welsh Government, which is good. Do you think that they should have an office in Gwydyr House, as happened with the Scottish Parliament?

Mrs Gillan: They have an office in Gwydyr House. It is on the ground floor and it is a very nicely appointed office.

Q530 Karen Lumley: Do they use it?

Mrs Gillan: I am not aware of whether they do. They can come into the reception and go to their office without coming into any other part of the building, so I am not aware of the frequency with which they use it. It is a very nice office.

Q531 Chair: Come, come Secretary of State. You must have an idea. I know they do not have to knock on your door to get in, but surely records are kept.

Mrs Gillan: I will ask whether the office keeps a record of how often the office is used. It is a very nice office. They are of course welcome to come and use the facilities in Gwydyr House any time that they want to, provided that it does not interrupt the business of the Department. They are very welcome guests.

Q532 Nia Griffith: Lord Green touched on taxation a little while back. I do not know whether Dr Cable could tell us whether he thinks there are features of the current UK taxation regime which are particularly attractive to investments. Looking ahead, would you see any practical way in which anything might be different in Wales-in other words, might there be a different taxation regime? How could that work in actual practice, and would there be any advantage to business from that?

Vince Cable: We have taken the view that the basic rate of corporation tax is probably the most important single measure of business competitiveness in terms of taxation, but specific features of the tax regime-such as the patent box and the R and D tax credit-also play into this. In terms of devolved tax powers, I realise that this is a very fraught and difficult area and I know you have a commission at the moment looking into that, so I will not trespass on its conclusions.

Lord Green: It is important to be tax competitive, at the risk of stating the obvious. Broadly speaking, I think the tax offer does seem to be recognised as competitive. Indeed, just objectively, it is on a European scale but, as we all know, there is one country in Europe that offers a significantly lower corporate tax rate. That is an issue for Northern Ireland, but it is not actually an issue in a British context, if that is the right term.

Q533 Geraint Davies: Dr Cable, it obviously is the case that if there is more economic activity, more jobs and more wealth creation in Wales, clearly the Exchequer gets money back or a return on that, but are you aware of any work that has been done on the impact of reducing the Severn bridge tolls on tax revenues and inward investment? Could you perhaps look at such an econometric study, maybe looking at examples around Britain-the Humber bridge and elsewhere in Scotland-to give the Treasury some idea of whether it was worth investing the money to reduce the toll, which is regarded as a tax on trade and investment, to stimulate business activity and to get the money back? It would not be a gift; it would be a bit of investment. Would you be prepared to look at that in your Department?

Vince Cable: I am not aware of any work. If any work was done, it would by the Department for Transport, but we can certainly put that to them. We are looking at tolling more generally-not in the context of bridges specifically, but in terms of new road developments. You have seen the autumn statement reference to the A14, which is basically applying a basic economic principle that that is one way of getting new investment going. In terms of the impact of toll bridges, I think you will really have to put that to my colleague Justine Greening.

Q534 Geraint Davies: But would you be prepared to encourage the commissioning of that work? Obviously, it would be of critical value to the South Wales economy, could pay back a positive profit to the Treasury and make a lot of difference. You have got the power to influence these sort of things in other Departments, haven’t you?

Vince Cable: I do not think I do on this particular point. I am always happy to do interesting research, but I am not aware that I can do very much on this one.

Q535 Chair: Is it not the case that the Treasury is looking at subsidising the Humber bridge and keeping down increases on the Humber?

Vince Cable: Yes.

Q536 Chair: Therefore, doesn’t Mr Davies have a point here-that if it is good enough for the Humber, it might be good enough for the Severn as well?

Vince Cable: Yes. This is a very difficult subject. There is an issue in Edinburgh as well-this has become a very major political issue. It may be that there is a role for somebody to do a comparative study. I do not think that that is for me, but I think somebody could probably usefully do it.

Mrs Gillan: Can I just make two points which might be helpful? First, I think you could ask the DFT and the Treasury what the financial situation is on the Humber bridge, because I do not think it is directly comparable to the situation on the Severn bridge and to the tolls and the contractual situation there, which takes us up to 2017. Secondly, as you know, this is being looked at, as I said earlier on, in the context of the autumn financial statement, with improvements to the road network as well.

Q537 Jessica Morden: I wasn’t going to ask about the Severn bridge but, seeing as the opportunity has arisen, could I quickly ask the Secretary of State for Wales about it? The Chancellor seemed to insinuate last week, when I asked him a question after the autumn statement, that when the bridges came back into the Government’s control he was looking at spending the tolling money on the infrastructure and, as you mentioned earlier, on improving the M4 corridor. Does that mean that any calls for the tolls to be reduced are not being heard because any money collected will go off?

Mrs Gillan: No, Ms Morden. I think it means that we are at the very early stages of these negotiations, and I would not want to prejudice them by trying to elaborate any further. I think that the situation is clear until 2017. It is quite obvious that we are looking at the road infrastructure. We have asked the Welsh Government what contribution they would make to improving the M4 corridor, and I think that discussions will take place moving forward on that basis, but I think that the message has been clearly heard.

Q538 Geraint Davies: Moving on, but related to that, on enterprise zones, I think that the Government spend £200 million in England on 24 schemes-around £10 million a scheme-yet all of Wales has £10 million. So we will have an enterprise zone in Bristol with almost the size of the whole budget for Wales, alongside this penal tax on trade and investment, which is the toll we talked about earlier, and yet we want to revive the south Wales economy. What does Dr Cable think about that as a sort of stranglehold on inward investment and trade? Don’t you think that something should be done to reduce the costs on the Severn bridge, and not invest enormous amounts in the gateway to Wales, in Bristol, which is basically stopping investment crossing the border?

Vince Cable: I can see you’re pushing me very hard to take bridges into my empire, and I am trying to resist the temptation-

Geraint Davies: Building bridges!

Vince Cable: I’m afraid I can’t really help you on the bridge issue. I was under the impression that the choice of enterprise zone was down to the Welsh Assembly Government, was it not?

Q539 Geraint Davies: I am simply making the point that they have only £10 million to spend across Wales, when one of these enterprise zones, in Bristol, would have what the entirety of Wales has. In terms of the strategic development of the south Wales economy, wouldn’t you agree that that is very harmful?

Vince Cable: Not necessarily, no. I don’t see it as a zero-sum game. If Bristol is able to develop as a very successful growth pole in the south-west of England, I would have thought that that would have benefits for Wales. There are a lot of overlaps through the supply chains, which I would have thought would have developed. I don’t see it entirely in the negative way that you do. Isn’t it the job of the Welsh Assembly Government to decide their own priorities regarding where the enterprise zones should be and how they should be configured? We would not want to trespass on their rights in that respect.

Q540 Geraint Davies: But isn’t there a danger of a sort of bidding war across the border, with one side with many more armaments than the other? As I said, Wales has £10 million to spread across the whole country. We will probably have that much planted on the gateway alongside this bridge.

Vince Cable: You keep coming back to the toll bridge, and I’m afraid I’ll have to keep passing on that.

Q541 Geraint Davies: I don’t know whether Lord Green has a view on whether that will have a negative or positive impact on inward investment in Wales.

Lord Green: I don’t. I don’t know enough. In my various travels in the past number of months I have never heard anyone mention the toll on the Severn bridge at all, let alone suggest that it was a material fact in their investment decision making.

Q542 Geraint Davies: So, Dr Cable, do you feel that it’s fair to have this great big enterprise zone in the doorway to Wales?

Vince Cable: It is perfectly fair, yes.

Chair: Good, that’s a great short answer. Jonathan Edwards.

Q543 Jonathan Edwards: Let’s try this another way. All the experience in the history of enterprise zones is that they suck wealth in from all other areas, so isn’t there a danger that this massive enterprise zone in Bristol will have a hugely negative impact on the south Wales economy? What are you going to do to safeguard the current jobs and firms that we have in Wales?

Vince Cable: One of the lessons of the 1980s was a partial conclusion along the lines you have suggested-that enterprise zones as they were constructed then had the effect simply of encouraging firms to move from one part of the UK to somewhere nearby. There were some successes-London docklands was one, and I think Sunderland was another-and one of the conclusions that we have drawn from that is that enterprise zones are much more likely to be successful if they attract inward investors from overseas. Certainly, having talked to Bristol council-10 days ago, I think-that is clearly the focus of its energies, and it is not at the expense of anyone.

Q544 Guto Bebb: My question is to the Secretary of State for Wales, again regarding enterprise zones. I know that the Secretary of State has to be extremely careful because of the respect agenda, but does she not share a degree of concern that six or seven months down the line we have seen no detail as to how the Welsh Assembly is going to implement enterprise zones in a Welsh context? All we have had is an announcement of geographical areas, for example Anglesey, which was warmly welcomed by the Assembly Member Ieuan Wyn Jones.

Mrs Gillan: Mr Bebb, this was raised with me at Welsh oral questions the other day. I have been as encouraging as I can, because I felt, being responsible for the Wales Office, that the enterprise zones in England had got a real head start, although I must acknowledge that the Welsh Government were also waiting for the position on capital allowances, which I think is now becoming clearer. I felt, however, that that had not prevented the announcements of more detail on the English enterprise zones from being announced. I was encouraged, and I politely said that I hoped the Welsh Government would get a wiggle on, because I have always felt that there was a danger of England getting ahead, and I think that that has happened in certain instances. I do not want to see that happen; I want to see Wales get ahead. I want them to be worried on the English side of the border in Bristol.

Q545 Geraint Davies: I want to ask Lord Green about inward investment. You mentioned the inward investment telescope coming down through China, the UK, Wales and Swansea. To what extent do you think there should be a focus on getting inward investment into Wales out of London? Once multinationals or investors have arrived in London, should we be saying, "Look, with the cost of salaries, the cost of property and the whole density of population, why don’t you come to a quality-of-life location where you can look out over the sea while you are on your PC in Swansea, reading a poem?" What opportunities do you think there are in reaching out from Wales across to London-or even Cardiff, in the case of Swansea-and pulling people in, rather than reaching out across the globe?

Lord Green: I think it is a very important point. There are many examples where companies have set up a European or UK headquarters in London and have done business in London, then have gradually moved out various aspects of their activity to other parts of the country. There must be opportunities to ensure that the case for Wales is properly made to those companies. That speaks to the importance of engaging with the European head offices of those companies in London and talking to them about the various things you have just mentioned. We need to talk to them about the reason why, both on cost and on cultural and lifestyle grounds, it would be a good option for them to think about investing at least part of their operations in Wales.

Q546 Chair: I wonder whether the Secretary of State for Wales can enlighten me on the Welsh investment strategic partnership, which I understand was a deal struck with Babcock and Brown to deliver 375,000 square feet of high-quality office space for inward investors coming into Wales, because that was identified as the problem holding back inward investment. I wonder whether that was ever discussed with the Secretary of State for Wales-it obviously took place before her time-and whether as a result of spending that money and developing that office space lots of private companies flocked to Wales. I have not been able to find out from the Welsh Assembly, unfortunately, so I wondered whether you might be able to help me out with that.

Mrs Gillan: Chairman, at this stage, I am not able to help you out on that, but if I can write to the Committee with an answer on that, I would be delighted to do so.

Chair: Absolutely. Thank you very much. Are there any further questions?

Q547 Jessica Morden: In one part of the inquiry, we have been examining public sector investment in Wales. Newport has obviously benefited in the past from civil service jobs being relocated. What assessment have you made with the Treasury of how many of the 300,000 additional public sector job losses running up to 2016 will happen in Wales?

Mrs Gillan: My views, as well as the views of the previous Secretary of State for Wales, are well known: Wales is too heavily dependent on jobs in the public sector. One of the reasons why I am so keen on growth in the private sector and inward investment is so that we can reduce that dependence on the public sector. That is something we should all look at.

Q548 Jessica Morden: With the forecast that more public sector jobs will be lost, how many of those do you expect to be in Wales?

Mrs Gillan: I have looked at all the comments that have been made on this, but I think that at this stage we do not know where the economy is going to go and what other areas the Welsh Government will cut in terms of public sector jobs. I am unsighted on that. As a large number of the public sector jobs in Wales are entirely dependent on the Welsh Government, it would not be right for me to predict any cuts that they may be making or have made already.

Q549 Geraint Davies: Let me follow that up. Would both Secretaries of State accept that private sector growth and job creation, to a large extent, depend on the spending power of the public sector and public servants? Public servants are going to see a 0%, 0% and 1%, 1% increase in pay, which is an aggregate reduction in real income of 16% over four years, so we will have less money to spend in the private sector and the public sector will have fewer contracts to give, too. How will that impact on private sector growth and inward investment, given that there is less consumption and investment from the public sector? Perhaps Dr Cable could answer first.

Vince Cable: That is a slightly complicated way of saying that there is an issue of aggregate demand.

Geraint Davies: Exactly.

Vince Cable: It is obviously true that in order to attract investment, you need demand. As you know, the Government’s strategy is to deal with the fiscal deficit, because we think that is fundamental to confidence, while at the same time trying to sustain demand through monetary policy, interest rates, credit easing, quantitative easing-

Q550 Geraint Davies: I guess what I was getting at is that in places like Swansea, and in Wales more generally, 40% at the moment is public sector. Although we all want to see private sector growth, could any more support be provided to help the public sector to enable the private sector to grow more quickly; or is it the same for everybody, irrespective of where you start?

Vince Cable: In England, we have the Regional Growth Fund, which is designed to address exactly that question. Where there is a disproportionate loss of public sector jobs, the fund is ready to put in additional Government capital to support private enterprise growth in those areas. I would guess that it is very much down to the Welsh Government to use their own instruments. They have a growth capital fund, I think, and a repayable, interest-free loan scheme. They might want to look at how the English Regional Growth Fund operates, because it is designed to address the problem you raise.

Chair: Thank you very much, Dr Cable. There may be others here who suspect that the public sector is actually dependent on the private sector for growth, but that is an interesting discussion that we do not have time for and it does not quite-

Q551 Geraint Davies: I thought that the Secretary of State might want to respond.

Chair: If she wishes to, that is fine.

Mrs Gillan: I think Dr Cable said it all. A lot of these levers are with the Welsh Government. They have just received a large amount of capital allocation-£216.2 million-and it is up to them how they spend it. There are no reasons why they should not consider that.

Chair: Thank you all very much indeed for coming along.