PARLIAMENTARY DEBATES HOUSE OF COMMONS OFFICIAL REPORT

Welsh Grand Committee

THE BUDGET

Wednesday 7 May 2014 (Morning)

CONTENTS The Budget General debate in progress when the Committee adjourned till this day at Two o’clock.

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The Committee consisted of the following Members:

Chairs: †MR DAI HAVARD,DR WILLIAM MCCREA

Bebb, Guto (Aberconwy) (Con) James, Mrs Siân C. (Swansea East) (Lab) † Brennan, Kevin (Cardiff West) (Lab) † Jones, Mr David (Secretary of State for Wales) Bryant, Chris (Rhondda) (Lab) Jones, Susan Elan (Clwyd South) (Lab) Buckland, Mr Robert (South Swindon) (Con) † Kawczynski, Daniel (Shrewsbury and Atcham) Cairns, Alun (Vale of Glamorgan) (Con) (Con) Caton, Martin (Gower) (Lab) † Llwyd, Mr Elfyn (Dwyfor Meirionnydd) (PC) †Clwyd,Ann(Cynon Valley) (Lab) † Lucas, Ian (Wrexham) (Lab) † Crabb, Stephen (Parliamentary Under-Secretary of † Moon, Mrs Madeleine (Bridgend) (Lab) State for Wales) † Morden, Jessica (Newport East) (Lab) David, Wayne (Caerphilly) (Lab) † Morris, David (Morecambe and Lunesdale) (Con) † Davies, David T. C. (Monmouth) (Con) Mosley, Stephen (City of Chester) (Con) † Davies, Geraint (Swansea West) (Lab/Co-op) † Murphy, Paul (Torfaen) (Lab) Davies, Glyn (Montgomeryshire) (Con) Newmark, Mr Brooks (Braintree) (Con) † Doughty, Stephen (Cardiff South and Penarth) (Lab/ † Owen, Albert (Ynys Môn) (Lab) Co-op) Ruane, Chris (Vale of Clwyd) (Lab) † Edwards, Jonathan (Carmarthen East and Dinefwr) † Smith, Nick (Blaenau Gwent) (Lab) (PC) † Smith, Owen (Pontypridd) (Lab) Evans, Chris (Islwyn) (Lab/Co-op) Tami, Mark (Alyn and Deeside) (Lab) † Evans, Jonathan (Cardiff North) (Con) Williams, Hywel (Arfon) (PC) Flynn, Paul (Newport West) (Lab) † Williams, Mr Mark (Ceredigion) (LD) Francis, Dr Hywel (Aberavon) (Lab) † Williams, Roger (Brecon and Radnorshire) (LD) † Griffith, Nia (Llanelli) (Lab) Willott, Jenny (Cardiff Central) (LD) Hain, Mr Peter (Neath) (Lab) † Hanson, Mr David (Delyn) (Lab) Fergus Reid, Margaret McKinnon, Sarah Heath, Hart, Simon (Carmarthen West and South Committee Clerks Pembrokeshire) (Con) † Irranca-Davies, Huw (Ogmore) (Lab) † attended the Committee 3 Welsh Grand CommitteeHOUSE OF COMMONS The Budget 4

years than ever before. In fact, the order books are full Welsh Grand Committee up for seven to eight years. I fully acknowledge that we inherited terribly worrying economic circumstances when Wednesday 7 May 2014 we came to power, but the Government’s economic policies are certainly bearing fruit—no more so than for his constituents. (Morning)

[MR DAI HAVARD IN THE CHAIR] Kevin Brennan (Cardiff West) (Lab): The economy was growing when the right hon. Gentleman came to The Budget power. Is not the reality that he is like a taxi driver trying to take credit for taking us on an unnecessary detour via a town called Austerity to get us to where we The Chair: I will make my usual comments at this would have been in the first place? point, colleagues, about how you manage your time. Extended interventions will not be welcome. Interventions are welcome, as long as they are appropriate, but it Mr Jones: It is interesting to see that deficit denial is would be nice if we could get in some Back-Bench still alive and well on the Labour Back Benches. All speeches before we start the afternoon sitting. That is major independent forecasters predict strong growth my usual plea to you about how you manage your for the UK economy. The CBI, for example, has described business. the outlook over the next three months as, “exceptionally strong and broad-based”. 9.30 am The pace of net job creation is three times faster under The Secretary of State for Wales (Mr David Jones): I this Government than in any other recovery on record. beg to move, That the Committee has considered the matter of the Budget Owen Smith (Pontypridd) (Lab): Will the Secretary as it relates to Wales. of State confirm for the record that when this Government It is, as ever, a huge pleasure to serve under your came to power back in 2010, they predicted that growth chairmanship, Mr Havard. It is also a huge pleasure to by now would be 8.4%, whereas it has actually been open this debate on the implications for Wales of this only 3.8%, half that of America and France? year’s Budget. The Budget reinforces the measures that we have taken to secure economic recovery since coming to Mr Jones: Since we came to power, we have had the power. Its provisions are designed to ensure that the eurozone crisis, which, of course, was completely interests of British businesses are protected, enabling unforeseeable. Having said that, in the face of those them to expand and create more opportunities for difficulties, we are now the fastest growing economy in employment. The Budget also gives more security to the western world. hard-working families, pensioners and savers. In 2010, this Government inherited the worst set of Jonathan Evans (Cardiff North) (Con): Will my right economic circumstances encountered by any Government hon. Friend cast his mind back to the steps taken by the for decades. By sticking to our long-term economic Labour Government, including the discredited car plan, frequently in the face of bitter opposition from scrappage scheme? It was ruinously expensive and produced the Labour party, we have started the process of turning a short-term impact on car sales. round the British economy. The success of our actions is becoming increasingly clear. Just last week, we heard that the economy grew by a further 0.8% in the first Mr Jones: The comments so far this morning from quarter of this year. That is the fifth consecutive quarter the Opposition seem to cast 2008 as some sort of of growth and the longest run of positive increases golden age, from which we are slowly receding. That is since before the great recession. What is more, the nonsense and even Labour Members know it. Office for Budget Responsibility expects that, later this In Wales, 41,000 more people are in employment, year, Britain will reach the point when our economy is compared with this time last year. This increase is larger than before it collapsed six years ago under the equivalent to the entire population of the town of previous Government. No major advanced economy in Wrexham moving into work. Unemployment in Wales the world is growing faster than Britain today. We are continues to fall and it now has a lower rate of growing faster than Germany, Japan and the United unemployment than across the UK as a whole. These States, and all major independent forecasters predict gains have been hard won by the British people, who strong growth for the British economy. have had to endure much since Labour’s downturn of 2008. Mr David Hanson (Delyn) (Lab): If all that is true, will the Secretary of State explain why Flintshire residents Jessica Morden (Newport East) (Lab): We all want to face the worst level of wage cuts in the whole of Wales? see more people in work, but the Secretary of State must admit the great insecurity in the job market. What Mr Jones: I should have thought that the right hon. would he say to the woman in the care sector on a Gentleman would be grateful for the fact that under this zero-hours contract who last week said to me, “I am Government, Airbus, which is the major employer in neither employed nor unemployed; I am in a grey area his constituency, has had more orders in the past few in between”? 5 Welsh Grand Committee7 MAY 2014 The Budget 6

Mr Jones: The opportunities for employment now It would appear that the Welsh Government have now are better than they have been since 2008. I make no dropped the pretence that the UK Government were to apology for the fact that we are still going through a be responsible for the entire cost of electrification. That difficult time, but we are seeing the signs of recovery. was never on the cards. Negotiations are currently Frankly, I should have thought that the lady that the taking place between the Department for Transport hon. Lady mentions was probably happier knowing and Edwina Hart’s Department, and that is the current that at least she has the benefit of employment rather state of play. I full agree with the hon. Member for than no employment at all. Blaenau Gwent that this is a very important project, but There is no room for complacency. The task is far I suggest to him that, as a Labour Member of this from over. There are still risks and difficult decisions to Parliament, he puts as much pressure as he can on his be made, and it is against that background that this colleagues in the Labour Welsh Government to fulfil year’s Budget was delivered. The greatest risk of all their part of the bargain. would be to abandon a long-term economic plan that is clearly working and producing real benefits for the Nick Smith: I thank the Secretary of State for that people of Wales. answer, which goes some way to addressing my concerns. This Government have great ambitions for Wales and It is important that the project go ahead. It is also its people. We are backing up those ambitions with important for value for money for the public purse that investment. We believe that investing in infrastructure is all this electrification is integrated and done at the same crucial to our economic recovery. time, so that we get a good service both from Paddington to Swansea and from the valleys down to Cardiff. Will he ensure that this work is done at the same time, and Nick Smith (Blaenau Gwent) (Lab): The business also try to make sure that the dualling that needs to take case for investing in electrification of the valley lines is place between Ebbw Vale and Cardiff is completed, so very good. Electrification is important for employment that in the eastern valleys we can take advantage of this there. Will the Secretary of State update us on negotiations important infrastructure investment? on that between the Welsh Government, the Department for Transport and the Treasury? Mr Jones: The hon. Gentleman properly speaks up for his constituency interests, for which I commend Mr Jones: Yes, I shall come to that in a moment him. However, I have to reiterate that good will from the because it is an important point that I wished to raise. Welsh Government is required; they must fulfil their In Wales, no less than anywhere, we are supporting side of the bargain. Frankly, matters were not helped by investment. We are providing the Welsh Government their pretence that they were never going to make a with the tools that they need to improve infrastructure, contribution to the cost of the project. I am glad to hear including the M4 at Newport. We are supporting a new that that has been abandoned and that negotiations are nuclear power station at Wylfa and a new prison in proceeding sensibly. Wrexham providing up to 1,000 jobs. We are investing in our digital communications by providing £69 million Owen Smith: I am sure that all the Secretary of State to roll out superfast broadband across Wales, and are has just said is true. Does he therefore regret the impression creating new super-connected cities in Newport and that he and the Prime Minister gave to the country and Cardiff, meeting the needs of business in the modern to Opposition Members that his Government would be era. paying for The hon. Member for Blaenau Gwent raised “the electrification of the railway line all the way up to Swansea”, electrification. That, of course, is important. As a including “the valley lines.” That is a direct quotation Government, we are committed to paying our part of from the Prime Minister. Did he misspeak or mislead? the bargain to electrify the Great Western main line all the way to Swansea. We need to be absolutely clear about what was agreed on electrification. It was an Mr Jones: I am surprised that the hon. Gentleman agreement with the Welsh Government, who had a part maintains that line. Let me be absolutely clear: there to play in that bargain. They were responsible for the was an exchange of correspondence between the Transport valley lines element of that electrification. There was an Secretary and the Welsh Transport Minister. The hon. exchange of letters between my right hon. Friend the Gentleman has seen that exchange of correspondence Member for Putney (Justine Greening) when she was and has been made aware of the memorandum from the Secretary of State for Transport and Carl Sargeant, Office of Rail Regulation. He knows what the agreement who was the Welsh Government Minister responsible was, so I am surprised that he is maintaining the fiction. for transport. It was clear from that agreement that the In September, the NATO summit is coming to Wales. Welsh Government would be responsible for the valley It will be the biggest event of its kind ever held in the lines element of electrification. That was subsequently UK; it will bring huge opportunities and enable Wales substantiated in meetings between officials, memos of to benefit from being in the global spotlight. To support which were taken, especially by the Office of Rail the private sector further, we are the first Government Regulation. to have committed to long-term, rising capital budgets It has now become clear that the Welsh Government to reverse decades of underinvestment, thus supporting thought better about their contribution to the cost of the new infrastructure needed for a modern economy. the project. There was a meeting a few weeks ago Since 2010, we have had to reduce public expenditure. between the Welsh Minister for Economy, Science and The budgets of all Departments, with the exceptions of Transport, Edwina Hart, and my right hon. Friend the Health and Education, have been significantly reduced, Secretary of State for Transport, at which I was present. and the Welsh Government could not be immune from 7 Welsh Grand CommitteeHOUSE OF COMMONS The Budget 8

[Mr David Jones] Mr Jones: The hon. Gentleman does not quite understand. Banks will lend only against good business that. However, the overall decrease in their budget is propositions. Business propositions such as construction considerably less than the reductions of up to 10% for in Wales, bedevilled by the regulation imposed by his non-protected UK Departments. Our commitment to colleagues in Cardiff, are not as good as those in England. supporting infrastructure and growth means that the It is quite simple. The best service he could offer his Welsh Government’s capital budget will increase in cash constituents is to speak to the relevant Minister in the and real terms. In total, it has increased by £800 million Welsh Assembly Government and suggest they look at since the 2010 spending review, and as a result of the what my right hon. Friend the Secretary of State for measures announced in Budget 2014, the Welsh Communities and Local Government is doing in England. Government will receive about £36 million of additional spending power over the next two years. Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC): Is it Government investment is crucial for business, and not true that small and medium-sized enterprises—very gives it the confidence it needs to invest. It is clear that good firms in Wales—are still being hampered? They confidence is returning. Business investment has grown are unable to access money in order to expand and for four consecutive quarters for the first time since carry out their business. What policy initiatives is the 2007, but we have to go further before the economy Secretary of State pursuing to help the bulk of firms in truly recovers. That is why we have doubled the annual Wales? Roughly 90% of the employment in Wales is in investment allowance to £500,000 until the end of next the SME sector. If we got that going we would see a year, which is expected to bring forward an additional great change in the economy. £1 billion in business investment. We are also extending the period in which enhanced capital allowances are available to companies investing in enterprise zones Mr Jones: The right hon. Gentleman must acknowledge to 31 March 2020. That will be a real boost for Welsh that bank lending is improving. I fully acknowledge businesses looking to invest in sites in the Deeside, that it has been a difficult time but it is improving. Haven Waterway and Ebbw Vale enterprise zones. We There are measures that can be taken by both Governments. have a package of measures to support our 190,000 In terms of the construction sector, which we are discussing, small and medium-sized enterprises in Wales, and we that is squarely in the hands of the Welsh Assembly are ensuring that businesses have access to the finance Government and it is up to them to bring forward they need. policies that are more friendly to business.

Ian Lucas (Wrexham) (Lab): I know the Secretary of Jonathan Evans: Is it not the case that, as well as State wants investment in business to happen, but the finance from banks, a new opportunity has arisen with construction sector in Wrexham is still telling me that the announcement from six major insurance companies banks are not supporting the levels of local investment —my own is not one of them—that they are to invest that are needed to drive forward the construction sector. £25 billion in infrastructure spending on transport and Will the Secretary of State look at more local ways of energy projects? When those projects are identified, is financing businesses—for example, those in north Wales? not much of that activity going to help small and An investment system that is run from the south-east of medium-sized enterprises? England does not serve north Wales well. Mr Jones: Clearly it will. That is of course augmented Mr Jones: The hon. Gentleman makes a fair point. by the UK infrastructure guarantee scheme, which is Although the cost of financing construction is improving, providing up to £40 billion of funding. Measures are it remains difficult. The construction industry in Wales coming through. It has to be a joint effort across is somewhat hampered by the Welsh Assembly Government. It is absolutely clear in Wales that both Government’s policies. One of the biggest problems is the UK Government and the Welsh Government have the additional regulations they impose, such as the to play their part. sprinkler policy, which most construction businesses Part of the finance package is ensuring that businesses think is crazy and hampers construction. It is noteworthy have the support they need to compete in the global that Persimmon Homes has pulled out of the sector in economy and to partner with international businesses south Wales altogether, blaming overregulation. I urge to boost exports and growth. At the Budget we committed, the hon. Gentleman to speak to his colleagues in the therefore, to doubling the amount of lending available Welsh Assembly Government and ask them to consider to support exports to £3 billion. I know that businesses emulating what the Secretary of State for Communities are up to the challenge set by the Chancellor to double and Local Government is doing in England. It is clear our exports to £1 trillion by the end of the decade. We that construction is growing significantly faster in England all know that some of the biggest global successes are than in Wales. manufacturers. It is those industries that see the reality of the global race. Part of that reality is that if we want Ian Lucas: I am asking the Secretary of State about competitive industry here in the UK we must be able to something that is in the remit of the UK Government. compete with the industrial energy prices elsewhere. It is about business investment and financing in north The Budget sets out a package of reforms radically to Wales. That has already been dealt with by the Welsh reduce the costs of energy consumption to business, Government because they delayed implementation of particularly manufacturing. We will cap the carbon the sprinkler policy. Will the Secretary of State get the price support rate at £18 from 2016-17 to the end of the Chancellor to recognise that the UK is not just the City decade. We will extend the energy-intensive industries’ of London; it is the rest of us? compensation for the cost of the carbon price floor 9 Welsh Grand Committee7 MAY 2014 The Budget 10 until 2018-19 and introduce compensation to those 14,000 people in Wales out of income tax altogether— industries for the cost of the renewables obligation and 155,000 since we came to power. feed-in tariffs from 2016 to 2018-19. We are determined to do all we can to ensure that more people are in employment with the security that David T. C. Davies (Monmouth) (Con): My right comes with a pay packet. To ensure that child care costs hon. Friend knows that I have a great amount of do not become a barrier to employment, our tax-free respect for the work that he does. However, on this issue child care scheme, which will start next year, will support I frankly feel that the Government are getting it wrong. up to 110,000 families in Wales. The scheme will cover Does he agree that it is bizarre to put extra costs on to 20% of working families’ child care costs up to £6,000 manufacturing industries and then pay some of them for children born in or after September 2010. It will compensation to make up for the tax we put on them in encourage more people, particularly women, to go out the first place, in order to combat the problem of into the labour market and will increase the security of so-called global warming, which does not appear to be their families. happening as we have not had a rise in temperature since 1997? This is also a Budget that helps hard-working people save for their future. We believe that people in this Mr Jones: There are few matters on which my hon. country have not saved enough. Saving is crucial to Friend and I disagree. One of them, I am afraid, is people’s security. So there are measures in this year’s climate change. I have been a reluctant convert to the Budget to support savers at all stages of their lives, reality of climate change. I know my hon. Friend disagrees. reducing taxes for the lowest-income savers, giving savers I believe that these measures are good for energy-intensive greater flexibility in their ISAs, and creating new products industries. Indeed, my hon. Friend the Under-Secretary to help retired savers see a better return. Not only are recently had a round table event when these policies we cutting the savings income tax rate to 0%, but the were discussed and the industries that attended were band to which it applies will be extended from £2,790 to pleased with the introductions made in the Budget. £5,000. That will benefit up to 74,000 savers in Wales. We are further helping savers by reforming ISAs, making Huw Irranca-Davies (Ogmore) (Lab): In contrast to them simpler, more attractive and more flexible. Three the hon. Member for Monmouth, may I compliment quarters of those who hit the cash ISA limit are basic the Secretary of State on the package that has now rate taxpayers, which is why we are increasing the come forward? My criticism is that it is well overdue. annual limit to £15,000 from 1 July. Many of the measures that are now being made to We know too that pensioners have had a difficult safeguard these industries and keep them in Wales, the time over the past few years. With savings rates reduced, UK and Europe should have been taken about three many of them have found it difficult to get by on a years ago. Did the Under-Secretary face any criticism at lower income. Our triple lock has protected the state that meeting that the hole that the Government got pension, but returns from other investments, particularly themselves into was of their own making? interest-bearing products, have declined significantly. This Budget saw the launch of the new pensioner bond, Mr Jones: I do not believe that he did, but no doubt a National Savings and Investments product open to the hon. Gentleman will be in a position to ask my hon. everyone aged 65 or over. It will pay market-leading Friend directly because I know he will be here for the rates and be available from January next year. The exact entire session today. This is a Government who are on rates will be set in autumn to ensure the best possible the side of industry. We are backing exports, backing offer, but we expect them to be 2.8% for a one-year manufacturing and backing a Britain and a Wales that bond and 4% for a three-year bond. That is significantly build. better than anything equivalent in the market today. A maximum of £10,000 can be saved in each bond. That David Morris (Morecambe and Lunesdale) (Con): As will be a significant benefit to Welsh pensioners, who the chair of the all-party group on coastal and marine will also welcome the new rules on annuities. It has long issues, I can report that there was more traffic going up been a patronising disgrace that pensioners should be and down the harbour in Milford Haven. A lot of that regarded as incapable of being trusted with their own was down to the work that my hon. Friend the Under- pension pots. The Budget will change that. Nobody will Secretary has done. It shows that the economy is growing be forced to buy an annuity. We believe that people who in that sector of Wales and is flourishing. have worked and saved hard all their lives and done the right thing should be trusted with their own finances. Mr Jones: My hon. Friend is right to identify the To conclude, this Budget sets out the next steps in our importance of Milford Haven waterway to energy in long-term economic plan. It is about delivering economic this country. As well as supporting businesses and the security for the people and businesses up and down the industries upon which Wales relies, we have sought in country. the Budget to help individuals and families who have had such a difficult time since the downturn of 2008. We recognise that times have been hard for household Ian Lucas: It is interesting that the Secretary of State budgets, which is why we are backing hard-working has not mentioned one group: young people, particularly people, ensuring that they keep more of what they earn young people who are unemployed. Will he discuss with and more of what they save. Just last month we saw the Department for Work and Pensions creating a situation the income tax personal allowance increase to £10,000. where people can move from universal credit into Jobs At the Budget we committed to more help. As of April Growth Wales—a very successful scheme providing jobs next year we will increase the personal allowance to for young people—without penalty? At the moment, £10,500, saving a typical taxpayer over £800 a year. The that is not possible and it is entirely unreasonable. Will increased personal allowance will lift an additional he have serious discussions about that? 11 Welsh Grand CommitteeHOUSE OF COMMONS The Budget 12

Mr Jones: We have various projects and initiatives in politicians say. They certainly do not believe what we Wales, some of which are delivered by the Department have heard from the Secretary of State today—that for Work and Pensions, some by the Welsh Assembly under the current Tory party people in Britain have Government. One issue that we have is that those policies never had it so good. What we have heard today and in do not align sufficiently closely. I am pleased to tell the the Budget is the mix of complacency and Crosbyite hon. Gentleman that discussions are continuing at the spin that we have come to expect from the Government. moment between the Department for Work and Pensions and the Welsh Government. It is important to put it on Mrs Madeleine Moon (Bridgend) (Lab): Will my hon. the record that the atmosphere has improved tremendously Friend suggest to the Secretary of State that he could since Mr Skates became the relevant Welsh Minister also look, in the coming year, at Macmillan’s “wind of with responsibility for this. We had a letter from him change” speech? A wind of change will certainly blow only this week, which indicated that he was anxious to across these isles in the coming year. do more to co-operate with the Department for Work and Pensions. The time scale that he set out for that Owen Smith: That is an excellent suggestion and I am co-operation was rather lengthy, and thus will be the sure that the Secretary of State should look at many subject of further negotiation. However, the hon. Gentleman Macmillan speeches. Macmillan was a politician who raises an interesting point and I am glad that he sees the understood the role of government—to intervene in importance of those policies being aligned as far as markets and deliver fairer economies and a fairer share possible. of national wealth for people. The Tory party in general would do well to look to his example. They might do To conclude, the Budget is about backing our businesses well to read his great 1937 book “The Middle Way”, to compete on the global stage. It is about rewarding which included lots of remedies that the current hard-working people and their families, and about ensuring Government should adopt. that our pensioners get the best deal possible. We fully acknowledge that in the recovery from Labour’s great However, you do not need me to tell you the reality, recession there can be no quick fixes or easy wins, only Mr Havard, and nor does the country. People can pick the determination that, with the people in Wales and up the newspapers. I have looked at the newspapers of the whole of the UK, we build a resilient economy that the past couple of days and found headlines that spell is fit for the future. These positive actions can only be out the truth, as opposed to the spin that we have heard delivered because we have restored stability to our public from the Secretary of State. The Daily Telegraph today finances and secured the economy on firmer ground. has the headlines “Sainsbury’s says rising costs of living We believe that this year’s Budget is good for Britain, hitting sales”, and “OECD warns housing boom”—in good for Wales and good for the long-term security of the south-east—“risks overheating UK economy”. the hard-working Welsh people. “Booming Britain running smoothly? Don’t believe the hype”. That is in The Guardian this morning. [Interruption.] Well, the other two were from the Telegraph. The Chair: I have one Member who has written to say Other headlines are: “Rising cost of living ‘forcing that he wishes to speak in the debate this afternoon or students to use food banks’” and “Cost of Living: later this morning. He is involved in another discussion 1.4 Million UK Workers on Zero-Hours Contracts”—as at the moment and is therefore not here. If people wish opposed to the Government statistics that suggest that to speak, will they please stand and indicate that they there are only 100,000 or so on zero-hours contracts. Of want to be on the list for Dr McCrea this afternoon? course the Office for National Statistics had to correct That would help me enormously. them and tell them it was at least 500,000. Others think that it is more like 1.5 million people. Finally, there is 9.58 am “Parents going into debt to fund cost of ‘Boomerang Kids’ still living at home in their 20s and 30s”. The Owen Smith: It is a pleasure, as ever, to serve under middle is still being squeezed. your chairmanship, Mr Havard. During the Secretary of State’s speech, I reflected on the extent to which Jonathan Evans rose— politicians of all stripes are a bit like magpies: pinching Owen Smith: I give way to a representative of the ideas and rhetoric from across the ages and sometimes squeezed middle of Cardiff North. even across the aisle. The most interesting example in recent vintage is Labour’s appropriation of the one Jonathan Evans: I welcome the hon. Gentleman’s nation mantle, reflecting that we are now the only party conversion to Macmillanite politics. I can always lend with roots and representation right across Britain, as him “The Middle Way”if he likes. In fact, as a vice-president the Tory party is shrunk back to its heartlands—shrunk of the Tory Reform Group and chairman of Conservative back in Wales and across the rest of the UK too. Mainstream, I must say that his conversion to our That particular piece of political theft was from brand of politics is amazing. Perhaps I may share with Macmillan, but the reason why it occurred to me during him another headline from last Friday, which was not in the Secretary of State’s remarks was that it felt as if he, a Tory newspaper, but in The Independent—“Pound today, was appropriating another phrase famously used leaps after surge in manufacturing output”: by Macmillan, when he said people had “The latest stunning evidence of a UK manufacturing revival sent the pound surging to a five-year high yesterday”. “never had it so good.” Do the headlines that the hon. Gentleman read out It was extremely badly received, of course, even in the really reflect what the newspapers are saying? great affluent era of the mid-50s when Macmillan used that phrase to tell British people that things were better Owen Smith: First, Macmillan has lots to teach modern than before, and were always getting better under the politics. He was a great believer in Keynes, and in active Tory party, because people never quite believe what government, intervening to deliver fair shares in the 13 Welsh Grand Committee7 MAY 2014 The Budget 14 economy. I suspect that he would not recognise the the hon. Member for Cardiff North agrees that those current Tory party—he would certainly not recognise it anchor companies in Wales are better served with us as being in a one nation Tory tradition. being in Europe. I am not so sure, however, whether the As to manufacturing, the hon. Gentleman will know Secretary of State agrees that companies such as Ford, that contrary to what we heard from the Secretary of Airbus and GE, who are in Britain in part because we State, and while some outputs are improving from an are in the European Union, would necessarily be here if incredibly low base, investment in manufacturing and we were to pull out, as he suggests. construction is still at a record low in Britain. I presume that he will also know that, far from there being any Geraint Davies (Swansea West) (Lab/Co-op): In addition march of the makers or anticipated export-led recovery, to that excellent point, does my hon. Friend agree that exports are falling, not rising, in Britain, and that is this so-called recovery is not a one nation recovery? worsening our trade deficit, not improving it. That is Banks are fuelling mortgage lending in London and the the reality. south-east, which is causing a housing boom, but they have cut lending to business by 30%. In a Budget in Ian Lucas: Is not it important to realise that one of which we see pension liberalisation, what we wanted the most successful exporting and manufacturing areas was simultaneous tax incentives to emerge for investing is the automotive sector? Contrary to what the hon. in products that would invest in real jobs and growth Member for Cardiff North said earlier, the car scrappage across our regions and nations. scheme was a hugely important part of that. It built up relations between the car industry and the UK Government Owen Smith: That is entirely right. One of the headlines massively and it was not opposed by the Conservatives that I did not read out—there were so many that I did at the time. He is the first person who I have heard not know which to pick—but also from today was, in criticising the scrappage scheme in seven years. the Financial Times, which is not notably a Labour- supporting newspaper, the Bank of England warning Owen Smith: I share my hon. Friend’s incredulity at that the housing bubble risks derailing our economy. Government Members rubbishing the car scrappage We can cross-reference that against the report from scheme, because, as he said, not only did they support it Savills, the large estate agents, which shows that the at the time, but any expert in the automotive industry housing bubble is almost exclusively in London and the will tell you that stimulating the market through the car south-east: house prices in our part of the world have, scrappage scheme was a key way in which the previous by and large, declined during the past four years. The Labour Government protected an automotive industry Conservative party is creating this two nation economy in jeopardy owing to a collapse in car sales at the height that Macmillan would have decried with every breath of of the crisis in our economy. It may have been expensive, his being. but it led to the car manufacturing renaissance that we now see. Mr David Jones: I want to give the hon. Gentleman the opportunity to apologise for his mis-statement that Jonathan Evans: I disagree that mine is a lone voice. I supported pulling out of Europe. That is the view of the Institute for Fiscal Studies and the RAC Foundation. In fact, the chief executive of the Owen Smith: If the Secretary of State would like to Association of European Businesses said that the scheme disabuse us of our impression that he is in favour of us was like throwing money out of the window. not being in Europe—that is broadly the impression that the Tory party, and he in particular in Wales, has Owen Smith: I suspect that if the hon. Gentleman sought to give—and if he wants to tell us that Wales were to talk not to some of those bodies but to the car would be better off in Europe, as opposed to playing manufacturers—the people who we were supporting at footsie with the notion of pulling out, we would be the time—they would say that it was an extremely delighted to hear that. successful scheme, which stimulated car purchasing and demand. Mr Jones: The hon. Gentleman knows full well the Conservative party’s position, which is renegotiation Mrs Moon: The Ford factory is in Bridgend and, for and then to put the issue to a vote of the British people. Ford, the scheme was a huge success. It meant that We believe in trusting the British people with a vote; he many local people could invest in Wales by purchasing does not. their own transport, which, owing to the decline in bus transport, allowed them to travel further to work. Does The Chair: Order. We are starting to range a little my hon. Friend agree that Ford has done fantastic work widely. The title of the debate is the Budget—that is, in encouraging women to study science, technology, this current Budget—as it applies to Wales. I shall say engineering and maths? It has increased its funding to what I usually say, which is that context is useful, but it 50% for those on the Blue Oval scholarship programme should not stray too much into areas that are somewhat in STEM subjects. Companies such as Ford should be extraneous to the more narrow discussion that we are commended for that. having this morning.

Owen Smith: I second what my hon. Friend said. I Owen Smith: Of course, Mr Havard. I merely say that add that Ford, a great company in south Wales and in the context of the economic performance of Wales, it hugely important in her constituency, would not necessarily is worth noting that the importance that companies— be there if we were pulling out of Europe. I am sure that particularly those anchor companies who are foreign 15 Welsh Grand CommitteeHOUSE OF COMMONS The Budget 16

[Owen Smith] of workers than anywhere else in the UK. That is the reality of the economy of Wales over which the Secretary direct investors and are so important to Wales—attach of State is presiding. to our membership of the European Union is well understood. The certainty with which they want a deal David T. C. Davies: I have listened with interest to the from Government in a context in which they can invest hon. Gentleman’s statistics and predictions, but I have is important. We believe that that certainty and the been looking back with interest at some of his previous interests of the Welsh economy are being jeopardised speeches, and I see that in the Opposition day debate in by the current Government’s playing footsie with leaving. June 2011 he was predicting terrible rises in unemployment, suggesting that 200,000 extra people would be unemployed Jonathan Edwards (Carmarthen East and Dinefwr) as a result of this Government’s policies. Will he now (PC): The hon. Gentleman is painting a grim picture of admit that those predictions that he was making in 2011 the imbalances in the UK economy. Is it not all very were wrong? I shall turn with interest to 2012 in a reminiscent of the record of the last Labour UK second. Government? Owen Smith: No. What I was talking about then were Owen Smith: No. We saw 36 consecutive quarters of the OBR’s projections for the number of public sector growth. We have seen three quarters of pathetic growth job losses that were included within the Red Book at the under this Government. This Government said that time, and they have come to pass. What have largely they would grow the economy by about 8.4% from 2010 taken their place are many zero-hours contracts and to today. They have grown it by less than half of that, part-time jobs—insecure, low-paid and second-rate work. by half of the rate of America, by less than half of the We are in favour of not just full employment, which the rate of much of Europe and by a worse rate than Government glibly talk about, but full, decent employment. France. This is a tale of woe and mismanagement—a tale of this Government compounding the problems Jessica Morden: To add to the list that my hon. that we had, not as a result of Labour’s great recession, Friend gave out earlier, I wonder whether he has seen as they put it, but as a result of the global recession that the report from the Resolution Foundation yesterday, affected all of the Eurozone and America. which talked about the rise in self-employment—out of desperation rather than choice—and said that those Mr Llwyd: The hon. Gentleman has made the point going into self-employment were, on average, earning about the disparity between the small growth of the 40% less than typical employees. Welsh economy and that in England, particularly the south-east, but not so long ago his Government were in Owen Smith: Yes, of course. Worse still, another favour of regional pay. That would have depressed the aspect of the sleight of hand that this Government are economy of Wales in untold measure. using regarding the statistics has been to present those self-employed workers as some of the so-called 1 million new businesses created in Britain; it is quite extraordinary. Owen Smith: Again, with respect to the right hon. The reality is that we have a system in which many Gentleman, that is rather a selective misreading. people being employed through agencies are, through no desire of their own, forced not to be employees but Mr Llwyd: You were not here then. self-employed. It is spin; it is sleight of hand, and frankly it is not decent work. Owen Smith: I was not here, and there was a measure of tiered pay on a regional basis introduced in the David Morris: I find that absolutely incredible. As a courts system. That led to increased pay for some of the former employer myself, I know that it is illegal to force lowest-paid workers in some of the highest-cost housing anyone into any other form of employment. Where did areas in London, Manchester and Leeds. To extrapolate the hon. Gentleman get that from? from that that the last Labour Government were in favour of regional pay is wholly unfair. This Labour Owen Smith: The hon. Gentleman ought to talk to Opposition are not in favour of regional pay and I am some of the big employment agencies in this country, absolutely not in favour of regional pay in Wales or because it is now standard practice. anywhere else. The reality for most people in Britain is that, as I said David Morris: Where did the hon. Gentleman get previously, we now face the longest squeeze on living that from? standards since the 1870s—an extraordinary statistic. Most workers have not seen a real-terms pay increase for nearly four years. Wages are down for average Owen Smith: The hon. Gentleman should go and talk families by £1,600 since David Cameron became Prime to Hayes, Acorn or any of the other big employment Minister. The Institute for Fiscal Studies shows that the agencies. It is standard practice to ask people, when average family is £891 worse off. The OBR confirms signing on as agency workers, to declare themselves that people will be worse off in 2015 than they were in self-employed. 2010—the first time that that has happened since before the last war. Energy bills are almost £300 higher for Huw Irranca-Davies: I thank my hon. Friend for his average families in Britain and 300,000 Welsh workers good analysis of what is happening with the unemployment earned below a living wage in 2012, a higher proportion statistics. As we all know, throughout the 1980s, one of 17 Welsh Grand Committee7 MAY 2014 The Budget 18 the greatest lies perpetrated on the British public was I am now talking about a new phenomenon: the the fixing of the unemployment statistics, as people new way in which zero-hours and other limited terms were moved on to incapacity benefit and long-term and conditions low-wage contracts are being used by illness. We now see people being moved into short-term employment agencies in particular and other employers. or zero-hours contracts and self-employed work that we Why do we think McDonald’s, with its incredibly hear is paying 40% below the average wage in an area. sophisticated processes and pay-roll technology, needs People are being forced into penury and are earning 120,000 workers on zero-hours contracts? Is that seriously levels that do not allow them to put a roof over their the only way an employer as incredibly sophisticated as head or food on the table. That is the great lie that is that can manage the peaks and troughs? No; it is about now being perpetrated on the British public, including exploiting people, plain and simple. the people in Ogmore and Bridgend and throughout Wales. Huw Irranca-Davies: In my role as shadow food and farming Minister, I recognise great things that McDonald’s Owen Smith: Quite right. My hon. Friend, rightly, does, in food sourcing and so on. However, the idea that shows passion in reflecting on the matter. We all know, a large corporation cannot plan its work force in such a from talking to our constituents, that that is the truth of way that somebody who regularly commits hours of modern Britain. That is why we have 900,000 people in work to them cannot be on a contract, with the protection Britain using Trussell Trust food banks. Nearly a million of terms and conditions that comes with that, seems not people are relying on food banks, 80,000 of them in only amazing but absolutely reprehensible. Organisations Wales. Who are those people? They are not, as some need to step up here. It is not zero-hours contracts that Welsh Tories would say, people who want to spend extra need to be completely abandoned, as Plaid Cymru money on Sky TV— suggests, but the exploitation of them by employers who should do better. The Parliamentary Under-Secretary of State for Wales (Stephen Crabb): No one is saying that. Owen Smith: Absolutely. My hon. Friend is once Owen Smith: The hon. Members for Vale of Glamorgan more both passionate and right. The truth is that many and for Aberconwy referred to people who want to of our biggest employers—JJB Sports is another—are spend money on Sky TV—[Interruption.] Iamnot using short hours in order to manage their costs. That is making it up; I will provide the quotes. Those hon. an exploitation of individual workers that we should Gentlemen talked about drug addicts and people who not countenance in a civilised society. Unfortunately, have other substance misuse problems. The truth, if we the current Government are countenancing it. talk to the Trussell Trust, is that it is often the working poor who have to go to food banks to supplement the Geraint Davies: My hon. Friend will know that half a meagre income that they are able to eke out through million people are now on zero-hours contracts. The zero-hours, low-wage, insecure, second-rate jobs, with impact, apart from anything else, is discontinuity in worse terms and conditions. This Tory Government are benefits, as people go in and out of work. Does he agree sitting by, letting it happen and trying to spin that that that is a major source of food bank demand? On things are moving well in this country. They are not. top of that we have about 40,000 people in Wales suffering from the bedroom tax, on average having to Stephen Crabb: Will the hon. Gentleman withdraw lose £798 a week. It is the poor being crushed under the those remarks? I have never heard a colleague of mine Tory boot. from the Welsh Conservative party speak in terms that are anything other than sympathetic to the people who Owen Smith: Let me take the opportunity of my hon. use food banks. Government Members support their Friend’s mention of food banks to return to my earlier local food banks and recognise the important work that remarks, which elicited an interesting defence from the they do. For the hon. Gentleman to stand up this Under-Secretary. I will quote the hon. Member for Vale morning and just make up such ridiculous allegations of Glamorgan, who wrote this in the local newspaper against my colleagues is completely unacceptable. about food banks: “It is sad to hear that so many people are needing to use the Owen Smith: I give way to the right hon. Member for food bank. This will be for a variety of reasons: inability to Dwyfor Meirionnydd. manage money and to budget, addiction to alcohol or substance misuse, bullying at home”. Mr Llwyd: I understand that the hon. Gentleman is an historian, and he is on the brink of revisionism at the I think that is a disgraceful thing to say. The reality, moment. The agencies were brought in by the Labour according to the evidence, is that the majority of people Government under the guise of flexibility of labour, using food banks are doing so because they are working with the active collusion of the trade unions. So let him poor. [Interruption.] I absolutely support what I said. be careful in the way in which he addresses the agency “Alcohol or substance misuse” was said by the hon. workers. I agree with him that it is a bad thing, but it Member for Vale of Glamorgan to be one of the was brought in under the Labour Government with the reasons people are using food banks. That is a disgrace. active agreement of the trade unions. Mr David Jones: The quotation that the hon. Gentleman Owen Smith: I have the greatest respect for the right has read out makes it absolutely clear that my hon. hon. Gentleman. I think he is talking about the agency Friend the Member for Vale of Glamorgan was speaking workers directive from the EU, and the previous Labour in sympathetic terms about the individuals who have to Government’s response to that was a mistake. We did use food banks. The hon. Gentleman suggests that he not appreciate the difficulty that agency working was was decrying them and so misrepresents my hon. Friend’s causing people. position. He should withdraw. 19 Welsh Grand CommitteeHOUSE OF COMMONS The Budget 20

The Chair: Order. We are starting to get people not less and to settle for what they have right now in Britain, speaking through the Chair and there are discussions which is low growth being described as better than no about Members who are not present. That is not particularly growth. I hope people will recognise this new paradigm productive. As I said earlier, the debate is about how the of low wages, insecure work, worries about the future, Budget applies to Wales, as well as the generality of worries about whether the children will succeed as zero-hours contracts, to give some context, but I am not much as their parents and a UK economy that continues going further into the detail. Mr Smith, I would like to to be run for the most privileged and those who have the make progress on all of the other aspects of the Budget most, rather than ordinary people. In contrast, Labour’s as it applies to Wales—infrastructure, investment and vision for Wales is a positive one. We want an economy the other matters listed earlier. that will work for everybody, not just for bankers and the wealthiest here in London. We plan to support Owen Smith: I am grateful, Mr Havard; I will move ordinary families so we can earn our way to higher on and talk about work. Contrary to the spin we heard living standards. earlier, we know that we are still in the midst of an employment crisis in Wales and the UK. As my hon. Friend the Member for Wrexham mentioned, almost a Huw Irranca-Davies: I wonder whether my hon. Friend million young people across the UK are still out of saw anything in this or previous Budgets from this work. The number of young people stuck on the dole Government that reset the paradigm whereby it seems for over a year has almost doubled under this Government. to the public, and certainly to me, that there is one rule Official figures show that there are now half a million governing the wages and remuneration of those at the people on zero-hours contracts. The number of people very top—they can command what they like and deserve unemployed in Wales has fallen 2% in recent years, but it—yet we somehow abrogate responsibility for those at the number of people in part-time work has increased the bottom and say that they can take what is left over, to 68,000. These are people who are identified as wanting because they do not deserve dignity in work or a wage to work full time, but are unable to find a full-time job. that can pay for the basic things in life? The Government should be congratulating our colleagues in the Welsh Labour Government in Cardiff on the Owen Smith: Absolutely. I agree with my hon. Friend. great success of Jobs Growth Wales. It has created more The most telling juxtaposition to illustrate that is that than 12,000 additional jobs, with almost 10,000 people we have a Government who are standing by and allowing filling those vacancies. It has made a huge difference, in the volume of people on low-wage, zero-hours contracts stark contrast to the Work programme, which has been to balloon in Britain, while the Chancellor trots off to shown to be almost useless. Brussels to try to defeat attempts by the wider European Union to curb excessive bankers’ bonuses. That is the Mr David Jones: Is the hon. Gentleman aware that most telling example of where the Government’s priorities the Work programme has created almost 12,000 jobs in lie and who they seek to protect: the wealthiest and Wales since it was implemented? those they hope will support them in future. By contrast, Labour has a plan that will help working people in Britain—a cost of living contract, as we are calling it. It Owen Smith: I am aware of that and I think the is very simple. improvement in the Work programme during the past 18 months is very welcome. However, the Secretary of Energy costs have risen by £300 in Wales over the last State will also know that in the first two and a half years four years. We will freeze gas and electricity bills through of their coexistence, Jobs Growth Wales was between to 2017 and reform the energy market. More than a seven and eight times more effective than the Work million households in Wales will benefit from this, programme at getting people into work. He will also saving the average family £120 and an average small know that, in stark contrast to the Work programme, business £5,000. We will cut income tax for hard-working Jobs Growth Wales has a much higher proportion of people by reintroducing a lower, 10p starting rate. people working in the private sector. He will also know Introducing that rate will help 24 million people on that the number of people who stay on in work in the low and middle incomes. We will introduce greater tax Jobs Growth Wales programme is almost double that of fairness by reversing the £3 billion tax break for the top the Work programme, so it is twice as successful—more 1% of earners, and we will tax houses worth more than in the private sector—and seven times more efficient. £2 million. We will tackle job insecurity. We will ban exploitative, zero-hours contracts. We will ban employers from being Mr Jones: Is the hon. Gentleman also aware that the able to require zero-hours workers to be available on the Work programme deals largely with the hardest cases, off chance that there may be some work for them, like namely those who have been out of work for longest? mill owners or dock owners in an earlier era. We will Would he agree with the point I made to the hon. stop employers from requiring zero-hours workers to Member for Wrexham a moment ago, about how the work exclusively for them and we will ban the use of DWP and the Welsh Government should align their zero-hours contracts, where employees in practice work employment policies together to get as many people regular hours, unless workers specifically request that into work as possible? flexibility. We will make work pay by strengthening the minimum wage and providing tax breaks to firms that Owen Smith: Of course I agree with that. We absolutely boost pay through the living wage. The minimum wage, want the DWP and the Welsh Government to work one of the greatest achievements of the last Labour together, because we absolutely do not want, as I fear Government, has been languishing and falling in value the current Government do want, people to settle for for too long and we need to increase it. 21 Welsh Grand Committee7 MAY 2014 The Budget 22

We will support incentivising the market to deliver a will have borrowed almost £200 billion more than they living wage by boosting the balance sheets for companies planned in 2010. National debt as a percentage of GDP that pay people a living wage. We will work with the is now not forecast to start falling until 2016-17, under Welsh Government, as the Secretary of State advises, to the next Labour Government, breaking the Government’s back the next generation with a jobs guarantee for key fiscal rule. What have we put up with throughout all young people and more apprenticeships. I suspect that that pain? What have we seen? We have seen lower the Tories do not understand the transformative impact wages, more insecure jobs— that an apprenticeship can have for people in places like GE in my constituency, despite the fact that the Secretary Mr Jones: Apologise! of State has been there on several occasions. In Wales, however, we do understand it. That is why the Welsh Government are to be commended for their efforts to Owen Smith—and a Government who ask Labour to increase the number of people who start apprenticeships apologise for leaving them with rising growth and reducing —up by 45% in 2012-13 versus the previous year, to unemployment. That is the truth, but they do not want 25,000. to hear it. The truth is that we cannot trust the Tories on the NHS, we cannot trust the Tories in Wales and we Welsh apprenticeship completion rates were 85% in cannot trust the Tories on the economy. 2011-12, in contrast to England, where, under the Tories, the apprenticeship completion rate is just 73%, down 10.35 am more than 1% on the previous year and falling, having risen every year under the last Labour Government. Jonathan Edwards: It is a pleasure to serve under your Tories, of course, do not understand this. We do. We chairmanship this morning, Mr Havard. understand that there is a cost of living crisis in Britain Since we returned from the Easter recess, Welsh affairs and that we need a Government who actively seek to do have been dominating Parliament. We have had two something about it, as opposed to simply spinning. days of the Wales Bill on the Floor of the House; last Let me turn, in conclusion, to where the Government Thursday, we had two debates in Westminster Hall on succeeded. We have to cast around quite carefully to inquiries conducted by the Welsh Affairs Committee find some metrics against which to measure this into the bedroom tax and the Work programme; this Government and determine whether they are making a morning, we have the debate in the Welsh Grand success or a Horlicks of our economy. I looked at their Committee; and simultaneously, some of our colleagues own measurements. First, let us look at growth in the are debating the future of S4C in Westminster Hall. If economy. As I said, they said it would grow by 8.4%, we continue at such a rate, we will have to start making but it is just 3.8%—slower than America, Germany and the case for more Welsh MPs. With Mr Cornock, France. GDP growth this year is still expected to be Mr Williamson and Mr Phillips in attendance, I hasten lower than the OBR predicted in 2010 and this is now to add that I say that in complete jest—[Interruption.] the slowest recovery in over 100 years. The UK economy We need more Plaid Cymru MPs anyway, but that is is still 1.4% below its pre-crisis peak. another matter. On assuming office in 2010, the Chancellor embarked Mr David Jones: The hon. Gentleman mentions the on a ruthless austerity experiment with two goals: first, recovery. Does he accept that what we are recovering to eliminate the annual deficit in its entirety before the from is the great crash of 2008, over which his party end of the Parliament in 2015; and secondly, to maintain presided when it went into that recession with the the triple A credit rating. With those goals, the UK biggest structural deficit of any western nation? Government have failed completely. The triple A rating has been lost—without the resulting hike in borrowing costs that proponents of austerity argued would be the Owen Smith: No, that is more utter nonsense from case—and the deficit is not now due to be eliminated the Secretary of State—the nonsense that we have been until 2018-19, and even then only after more spending forced to swallow for the last four years. The truth is cuts. that there was a global recession caused by a sub-prime Many economists and politicians such as myself were housing bubble in America that exploded across to critical of the fiscal strategy pursued by the Treasury, Britain and was, in part, being solved by the interventions on the grounds that it would reduce demand in the of my right hon. Friend the former Prime Minister. economy and hence performance, and that would exacerbate Thus, we saw rising growth and falling unemployment the deficit as a result of reduced tax receipts and increased at the point at which this Government took over. However, welfare costs. The OBR is now forecasting a deficit of this Government, with their ill-judged and foolishly £110 billion for 2013-14, as compared with the £60 billion austere economic policies, compounded the problem in predicted in 2010. On a purely fiscal front, therefore, the the global economy for Britain, leading to a flatlining Osborne plan has failed, and that is before the majority economy for three years. Only in the last 12 months are of the cuts feed into the system. we beginning to see some growth. David T. C. Davies: The hon. Gentleman obviously Mr Jones: rose— has a concern about the high level of the deficit, which I share. Should the cuts have been faster and deeper in Owen Smith: I have given way a lot to the Secretary of order to eliminate the deficit more quickly? State; I have given way enough. The truth is that his Government promised to balance the books by 2015. In Jonathan Edwards: My case is that the speed of the fact, they will not do that, and borrowing will still be cuts proposed by the Chancellor has failed to achieve £75 billion in 2015. Over this Parliament, the Government the goals set, so a programme of even greater austerity 23 Welsh Grand CommitteeHOUSE OF COMMONS The Budget 24

[Jonathan Edwards] The fourth element of economic performance is consumer spending, which accounts for more than 60% would have been more disastrous, with even poorer of the UK economy. I fear that the Government are economic performance results than we have seen to repeating the mistakes of the past. As I said last Thursday date. in Westminster Hall, the current consumer spending Less than 46% of the fiscal tightening was planned and house price inflation bubble is happening at a time to be achieved by 2013-14, and most of the progress to of stagnant wages, which means growth is being driven date has been achieved through tax increases. Only 36% by increased personal borrowing. In 2008, the level of of cuts, excluding social security and debt interest, will families’ borrowing was 100% of gross value added—the have taken place by the end of the 2013-14 financial worst in the western world—and we are getting back to year. Given the increased importance of public sector that level under this Government. The hon. Member for jobs in the Welsh economy, there is therefore some Cardiff North is not in his seat, but in debates on the concern that the worst of austerity in terms of those Budget in the Welsh Grand Committee soon after public sector job losses is yet to happen. I acknowledge, the election he described that as the big elephant in the however, the welcome news that private sector employment room. It continues to be the big elephant in the room for Wales as a whole seems to be performing better than for the UK economy. for the UK. Having said that, I echo the points made by the hon. Member for Newport East, who has just left Geraint Davies: Does the hon. Gentleman agree that her place. the fact that banks are investing in mortgage lending at 2008 levels, while lending to businesses is 30% down, Yesterday, the front page of The Independent was house prices are rising and real wages are falling means about a report by the Resolution Foundation: the self- that when the interest rate goes up, as it will when employed who have led the job growth in the UK unemployment falls below 7%, we will have a sub-prime economy now equate to 15% of the UK work force, or debt disaster? We will see it all again, but much worse. some 4.5 million individuals, but they are earning 20% less than they were in 2008. Jonathan Edwards: I share those concerns, which we debated last Thursday in Westminster Hall. It is even Huw Irranca-Davies: Does the hon. Gentleman agree more unsustainable than the situation that we faced in with my earlier suggestion? When we have the bland 2008 with the disastrous bubbles built up under the quotation of claimant count statistics, we ought to previous Labour UK Government. The only hope for challenge them at every opportunity, because of what the Treasury and the Chancellor is if the increase in lies underneath those statistics—exactly the same as business confidence, shown by industry surveys, results back in the 1980s. in increased business investment and if the improved outlook for the eurozone, reported yesterday in the Financial Times, results in increased exports. Jonathan Edwards: I fully agree. The Resolution Before I deal with the actual measures in the Budget, Foundation report makes that case clearly. When statistics I want to make the point that the economy is on the life are announced by the UK Government, we must scrutinise support mechanism of ultra-loose monetary policy and them in great depth. the effective printing of money via quantitative easing. The length and depth of the great recession raises concerns that much of the economic capacity built up Geraint Davies: On the point about increased confidence prior to the crash has been lost for good. Incredibly, in Europe, does the hon. Gentleman agree that companies UK GDP is 14% below the trend level it enjoyed prior based in Wales, such as Airbus, Ford and Unilever, to the economic crisis. It is still lower than its previous which should be increasing production to meet that peak in 2008, making this recession hugely unusual. demand, are now thinking of moving that production The GDP graphs for all the economic downturns of the to mainland Europe because they are worried about the past century show that at this stage in the cycle GDP risk that a referendum will lead to us exiting the EU? should be much higher than the pre-crash level. Normally, Therefore, Tory policy is costing us jobs now. there isaUoraV-shaped recession, with a sharp downturn followed by a short period of contraction Jonathan Edwards: That is an interesting point. We and a quick uptick. Since 2008, we have had an L-shaped deliberately launched the Plaid Cymru manifesto for recession—there was a sharp contraction and we have the European election at Mitsui Components, a factory been bumping along the bottom for five or six years. in Capel Hendre, the village in my constituency where I We were promised a geographical and sectoral was born, which employs more than 100 people living rebalancing of the economy in 2010, but there has been within a 10-minute commute of the Amman valley. It precious little progress in either. The economic growth located in the Amman valley specifically because we are in the past year has been driven by consumer spending, a part of the European Union. If we were not in the fuelled once again by a house price bubble that is largely European Union and there was no access to the single focused on London. There are four elements of economic market, we would not have those 100 jobs. I am very performance, and austerity has led to a reduction in concerned about UKIP’s drive towards a referendum, public investment. Echoing the points made by the hon. and that the Conservatives, in particular, are playing to Member for Pontypridd, according to the ONS’s latest that gallery. The UK Government are playing with fire data the UK’s goods exports slumped to a three and a when they try to appease UKIP voters. half year low of £23.5 billion in February—the lowest level since November 2010. Business investment fell by Huw Irranca-Davies: May I reiterate the comments 25% between 2008 and 2013, and the UK was ranked made by my hon. Friend the Member for Bridgend and 158 out of 173 in the global league table in 2012. draw the hon. Gentleman’s attention to the comments 25 Welsh Grand Committee7 MAY 2014 The Budget 26 made by the head of European operations of Ford, have to normalise and increase, thereby increasing the which employs 15,000 people in Dagenham and in cost of borrowing. That will inevitably create a serious Bridgend—it is a big employer in Bridgend? He said: headwind for the UK economy. Conveniently for the “I don’t want to threaten the British government”, Treasury, the Bank of England has decided that it will but went on to talk about the implications of toying not increase interest rates until after the next election to with the idea of withdrawing from Europe. Westminster. Although Tory Members, and some Lib Dem MPs, try to claim credit for recent economic news, Jonathan Edwards: I am grateful for that intervention. I and others will be painting a more cautious picture as There is a need for pro-Europeans such as ourselves to we approach that election. start making the case for Europe. If we allow the Economies always recover from recessions. The big right-wing media and UKIP to dominate the agenda issue with the last recession is why it has taken so long there is a big danger that public opinion will form for us to get back to the previous peak. That is behind them. unprecedented in economic history. The real economic I am very concerned about an in/out referendum. I debate for when we face the election, however, is not am even more concerned about an in/out referendum about what has happened in the past few years but based on a renegotiation in which the Westminster about who benefits from the recovery as we see parties make the case to repatriate regional funding and improvements in the outlook for the economy and for agricultural support—two budgets that provide the employment. Following the great depression in the 1930s, communities I represent with a huge amount of funding successive US Administrations, along with Congress, to sustain the local economy. launched new deal initiatives, focusing on what historians call the three R’s—relief, recovery and reform. Those Mr David Jones: Just to clarify the position, is it the were: relief for the unemployed and poor; recovery of case that Plaid Cymru does not believe that the people the economy to normal levels; and reform of the financial of Wales should have a vote on continued membership system to prevent a repeat depression. of the EU? Roger Williams (Brecon and Radnorshire) (LD): Will Jonathan Edwards: I am certainly not in favour of a the hon. Gentleman give way? referendum based on a renegotiation. If it was a case of a referendum on staying in with the status quo versus leaving, I would be happy to fight that campaign, but if Jonathan Edwards: Let me finish this point. We require it is going to be based on a renegotiation in which the a similar transformative zeal in response to the great UK Government want to repatriate regional funding recession. Unfortunately, we are seeing a return to and CAP funding, it would be, “Heads you lose, tails business as usual. you lose,” as far as the communities I represent are concerned—although I am not sure how I managed to Roger Williams: The hon. Gentleman is quite right get into a debate on Europe when I am trying to talk that recovery is such an important part of this issue, about monetary policy. and that means more employment. At the previous election, the Labour party put forward policies to increase The Chair: Order. Quite, Mr Edwards. Will you come employer national insurance contributions by 1%. I was back to the subject, which is more narrow? pleased that the coalition Government refused to go down those lines. We have now introduced a £2,000 Jonathan Edwards: I will take your guidance, Mr Havard, rebate on employer’s national insurance for every business. and concentrate a bit more on monetary policy. Does he not believe that that is a real incentive for people to take on more employees? Mr Mark Williams (Ceredigion) (LD): The hon. Gentleman mentioned agricultural support. Does he agree—I suspect he does—with the deep unease at the Jonathan Edwards: I have welcomed those measures prospect of a referendum that has been expressed by the during my time here in the House, because we are president of the Farmers Union of Wales, among others? essentially talking about a tax on jobs. I will talk Like me, the hon. Gentleman represents an agricultural specifically about the £2,000 allowance later in my seat and will know that there is deep unease about this contribution when I move on to the points that I matter. welcome in the Budget, and I want to raise one point about that on which I hope the Secretary of State might Jonathan Edwards: I certainly share those feelings. I be able to offer some guidance. remember attending a meeting with the Farmers Union The economic debate that will dominate the next of Wales some years ago to explain the dynamics at Westminster election will be about how we rebalance play. I am glad that the Labour party seems to have the economy on a sectoral and a geographical basis, and ruled out holding a referendum, as I was concerned that how we share the proceeds of increased wealth more it would jump on that bandwagon and make that equitably. Needless to say, I argue that an economic referendum based on renegotiation inevitable, and along recovery based on the same old failed boom-and-bust with it the loss of those two budgets, which are vital to models of the past, with increasing wealth polarisation the communities that the hon. Gentleman and I represent. at geographical and individual levels, is wrong. It would I was saying that the economy is on a life support certainly be a failure as far as Wales was concerned. system of ultra-loose monetary policy: interest rates are I read with great interest a story in the Daily Mail at a sustained record low and we have the printing of yesterday—not that I am an avid reader of that money via quantitative easing. At some stage, as the newspaper—based on the EUROSTAT figures, which hon. Member for Swansea West said, interest rates will once again indicated, unfortunately, that the communities 27 Welsh Grand CommitteeHOUSE OF COMMONS The Budget 28

[Jonathan Edwards] State has mentioned; we probably supported them. I have received representations from developers about the that we represent in west Wales and the valleys are matter, and I have an open mind. I have yet to come to a poorer than some of the former communist countries. firm conclusion, and when I do so, I will let the right There is something radically wrong with the UK economic hon. Gentleman know. That is the sign of a healthy model, which is why my colleagues and I would have debate. If there is evidence that it is affecting house liked to have seen a far more robust Wales Bill empowering building, clearly we need to analyse the National Assembly’s the Welsh Government with far more job-creating levers policy. to drive economic growth in our country. Returning to the Budget, my parliamentary leader always tells me that I need to be a bit more positive, so I Huw Irranca-Davies: On that point, while it is worth shall mention the measures that I welcome in the Budget. having a debate on the right balance between measures We support the increase in the income tax personal imposed on new as well as existing housing stock, I allowance to £10,500. We support the introduction of assume that, like me, the hon. Gentleman would support the £2,000 employment allowance in April 2014. However, measures to increase the energy efficiency of our housing I have received representations from independent stock in Wales, which is among the worst in the United pharmacists in my constituency who are not eligible for Kingdom, so that people could afford to pay their bills, that allowance. The Treasury argues that they are public and to provide new housing in the future. I assume that sector contractors, and therefore are not eligible. The the Secretary of State is not arguing against good pharmacists, however, argue that they do not receive an regulatory measures on housing stock. NHS salary or pension, and that that £2,000 allowance would enable them to invest in their businesses, which Jonathan Edwards: That would certainly have benefits would have wider health and well-being benefits for the in terms of the huge fuel poverty levels we have in economy and increase economic performance. Wales, but, as with all of these matters, the issue is about hitting a fine balance. As I am not a National Mr David Jones: I am grateful for the point that the Assembly Member—such issues are decided on a pay hon. Gentleman makes. As the son of a pharmacist, I band far higher than that of me and my Westminster invite him to write to me about the matter. colleagues—I admit that I have not studied them in any great detail. Jonathan Edwards: I would be more than happy to do so. I have already written to the Treasury, and I will The Government set the level of the welfare cap from ensure that the Secretary of State receives a similar 2015-16 to 2018-19 in the Budget. That is a pernicious letter. political measure. If we have another economic crisis The Treasury has doubled the annual business investment and unemployment increases, there will be less money allowance to £500,000 until the end of 2015, another for more people. A better way to reduce the welfare bill encouraging measure that I hope will lead to increased would be: to create jobs through investment in business investment. We know that businesses are sitting infrastructure; to cap rents; and to invest in social on hoards of cash. A real indication of the health of the housing to tackle the rising the housing benefit bill. economy is whether business investment levels increase Despite all the regressive measures, the Office for Budget substantially, albeit from a very low base that is, as I Responsibility projects that that bill will be more than said, among the worst in the world. My question to the £1 billion. It would also be better to have a living wage Treasury is: why has it taken so long to come up with to ensure the end of subsidising poverty wages through such a measure? working tax credits. We were surprised that the Labour party voted with the Tories for the cap and that, should We welcome the measures concerning export finance, it form the next UK Government, it has pledged to which will increase the direct lending programme match those spending policies. to £3 billion. However, I ask the Secretary of State to make his best efforts to ensure that Welsh companies We disagree with the real-terms cuts to public sector get a fair share of that lending. We welcome the provisions workers’ wages announced in the Budget, with an increase in the Budget to raise stamp duty for corporate purchases of only 1%. Again, we are seeing public sector workers of housing, but I look forward to Royal Assent on the paying the price for the mistakes made by the financial Wales Bill, which will give the Welsh Government the sector at a time when bankers’ and executives’ pay is ability to introduce innovative policies, if they so decide, rocketing. That shows that we are far from being all in to curb speculative behaviour in the housing market. this together. We also welcome the increase in the ISA allowance to The Budget’s signature policy was the measure to £15,000, and the abolition of the 10% tax rate on abolish the need to purchase a pension annuity. No one savings. We agree that we must encourage as much here will defend the current annuity market. However, I investment by individuals and families as possible. am concerned that individuals might make significant draw-downs and use that money to buy property and Mr Jones: The hon. Gentleman rightly mentions the further fuel the housing bubble, seeing that as a more importance of the housing market. Does he agree with attractive return on investment than accruing money in the points that I made earlier about the fact that the a pension pot. That may result in even more buy-to-lets, Welsh housing market is being significantly depressed a bigger property bubble and the distortions we see by the over-regulatory policies of the Welsh Government? currently in the housing market. An alternative to the measure to abolish annuities could have been to tackle Jonathan Edwards: That is certainly an interesting the skimming that has been going on in the pensions point. I am not sure what my colleagues in the Assembly industry for decades and to regulate the industry better did in relation to the measures that the Secretary of to ensure that people got better value for money. 29 Welsh Grand Committee7 MAY 2014 The Budget 30

On measures that we would have introduced, should We would have introduced a financial transaction we have been in such a position, I have long championed tax, and increased the top rate of income tax to 50p the case for an economic fairness Bill to rebalance the again. I tabled amendments to the Finance Bill a few economy on a geographical andsectoral basis. That weeks ago and was glad to receive the support of more would place statutory duties on central Government than 231 Members of Parliament for that policy. Departments, such as the Department for Business, We would have introduced a fuel duty stabiliser Innovation and Skills and its agencies, to distribute mechanism to address some concerns to do with fuel wealth geographically across the British state. That has price increases, which would be far more sustainable been done in Germany. The UK is by far the most and long term than the piecemeal approach of the UK unequal country in the European Union in terms of Government. We would obviously scrap Trident renewal, regional wealth. It is more unequal than Germany, which would save £100 billion over the project’s lifetime. which was literally divided by a wall for decades but We would scrap higher rate relief for pensions. That has managed to tackle those issues. UK Trade & would save £7 billion for the Treasury. Investment should follow the example of its German We would increase and improve strategies to tackle counterpart, Germany Trade & Invest, and manoeuvre tax avoidance and evasion. I welcome the fact that the foreign direct investment into the poorest parts of the UK Government have taken some steps to deal with it. state, instead of the free-for-all approach we have at However, they are drastically cutting the resources of the moment, which inevitably means that foreign HMRC—the very people in whom we should be investing direct investment is concentrated in London and the to tackle the tax gap, which is estimated to be at least south-east. £35 billion per annum. We would also support the Labour party’s policy of We would like to see the creation of a bank for introducing a mansion tax, but we would deliberately Wales—a Welsh public development bank to lend to exclude productive agricultural land. There is a danger, small and medium-sized enterprises and local industries. without an exclusion, that many agricultural businesses I appreciate that that is, in particular, a matter for the in my constituency might get caught up in that tax. We National Assembly, but I was visited by a business man would want specific Government measures to work last weekend who is developing a business manufacturing towards a living wage. That would reduce dependency élite bicycles, which is a huge growth market. Whenever on tax credits and in-work benefits such as housing I go around my constituency—[Interruption.] Well, I benefit, as I mentioned earlier. do try to cycle sometimes, but not as much as I would like—although I have bought a new road bike, so I have We would want swift adoption of the Silk commission little excuse not to get out more often. part 1 recommendations, some of which have been included in the Wales Bill. For the second year running That business man is developing élite bicycles, which I moved an amendment to the Finance Bill on devolving is a huge growth market—for instance, Leekes, the great air passenger duty, and unfortunately we lost for the department store in Cross Hands, has got rid of its golf second time, but that was something cherry-picked from department and now has only a cycle department in its the Silk commission and has not been included in the sports section, which gives an indication of the direction Wales Bill. We believe it should have been devolved to of consumer habits—yet he has failed to get any support the Welsh Government, especially now that we own our from the Welsh Government’s structures, namely Finance national airport. Wales. It offers loans, but he could get more competitive Geraint Davies: Would the hon. Gentleman support rates from commercial banks. He needs a one-off grant London having devolved air passenger duty for Heathrow? investment to help him develop his business to the next Does not he see that there would be a copycat effect? stage. The same applies to stamp duty. Boris Johnson is jumping up and saying he wants £1.3 billion for that. Does not Mr Llwyd: Does my hon. Friend agree that we need the hon. Gentleman see any problems? to look back at some of the successes of the Welsh Jonathan Edwards: I am making the case for and Development Agency and the Development Board for fighting for the national interest of Wales, and all those Rural Wales? They targeted small and medium-sized recommendations were made by the Silk commission, enterprises and were easy to deal with. Yes, they were which the hon. Gentleman’s party signed up to fully. It quangos, but they did a good job of work. I hope that at is disappointing that it has not used the Wales Bill, as some point someone will seriously consider emulating we have, to try to preserve the integrity of those the good work they did. It would certainly increase recommendations; that was of course a compromise for productivity and improve the economy of Wales. all the parties in Wales. Instead, the only Labour amendments have been wrecking amendments, putting Jonathan Edwards: My right hon. Friend has always further road blocks on the Wales Bill. championed the work of the Development Board for A matter of concern about the Wales Bill is the fact Rural Wales, which was led, of course, by the hon. that the measures included in it will not be devolved Member for Montgomeryshire. The point that we are until 2018. We are concerned about the lockstep. It making is that we need more flexible financing and makes it virtually impossible to use those powers. The funding structures to help businesses develop, and my only benefit I can see in holding a referendum with the right hon. Friend has only good words for what the lockstep model is the increased borrowing capacity that board achieved. That is why our party now advocates would be available to the Welsh Government should the the creation of a business bank to make those private referendum be won; but it is highly losable, and the decisions, rather than civil servants working in the drafting of the Bill has created a world of problems. Welsh Government. Perhaps that was the intention of the Secretary of State. 31 Welsh Grand CommitteeHOUSE OF COMMONS The Budget 32

[Jonathan Edwards] If we look at the economic history of the previous Government, they came into office looking to pay down We want the reform of the funding formula. I was the deficit, and indeed they did for about two years. interested to see the shadow Secretary of State for Tony Blair paid off some of the national debt, but by Scotland, the hon. Member for Glasgow East (Margaret about 2002, they had decided that the quickest and Curran), on television over the weekend saying that the easiest way to stay in office was to start spending money Labour party completely oppose reform of the Barnett that they did not have. They were doing so at a time formula. when the economy was booming, which was a completely ludicrous economic policy to follow. Owen Smith: The hon. Gentleman will know that my hon. Friend the shadow Secretary of State for Scotland Mr David Jones: Was it not the case that for the first said that we would nevertheless be dealing with the two years of that Labour Government, they were adhering specific problem of Barnett as it relates to Wales and to the economic policies of the previous Conservative the underfunding that Holtham and others have referred Administration? to. David T. C. Davies: My right hon. Friend reminds me Jonathan Edwards: I did follow that, and I have to that they were indeed, so when they were paying down admit that the Barnett formula is extremely complicated. the debt, they were doing something that we had suggested I would not profess to be an expert in it; there are doing in the first place. Either way, they started borrowing probably only about three people in Wales who do in about 2002, and were borrowing an average of about understand it. £30 billion a year at a time when the economy was booming, which meant that by 2007, they had already vastly increased the national debt, just at the moment Owen Smith: Name them! when we suddenly needed an injection of money into the economy. Rather than injecting a small amount, Jonathan Edwards: Gerry Holtham, Eurfyl ap Gwilym, they went on the biggest spending spree in the economic and probably Ian James Johnson, who served the Plaid history of this country, so that by the time of the Cymru parliamentary team with great distinction before 2010 election, the national debt had risen to about he went to work for the Assembly group. I am not clear £750 billion. how that would work, to be perfectly honest. It seems to me that the Labour party, in order to preserve its David Morris: I thank my hon. Friend for letting me position of opposing Barnett reform in Scotland and in intervene. Is it not the case that the previous Chancellor, trying to protect the statements that the First Minister the right hon. Member for Kirkcaldy and Cowdenbeath has been making every week in the National Assembly, (Mr Brown), sold our gold reserves off to China, and has now come up with some sort of hash of a statement, the next day China sold them on for twice the amount which means nothing—it is jam tomorrow. I would be of money, kick-starting their economy? Does he remember grateful to see how that would work in practice. the comment, “No more boom and bust,” and does he To conclude, the next UK election will be fought once agree that that was a false proposition? again on the economy and I look forward to making the case for our alternative vision during that election. It is David T. C. Davies: I believe, from memory, that they one that rejects a return to boom-and-bust economics sold off gold for about 220 or so dollars per ounce. and instead makes the case for depolarising wealth at When I last looked it was about $1,400 an ounce, and I both individual and geographical levels. would be interested to see what it is today. It was a pretty shocking economic decision. The idea that anyone can get rid of boom and bust is a fallacy, as anyone with The Chair: Thank you, Mr Edwards. It is nice to the slightest notion of economics would know. know we will be getting some jam; we are just arguing [Interruption.] I would be happy to give way. I will turn about when. to some of the comments of the hon. Member for Carmarthen East and Dinefwr, but let us bring ourselves 11.6 am back to the present. This Government came into office David T. C. Davies (Monmouth) (Con): I very much with a very clear policy that we would draw down the hope and think that the forthcoming election will be deficit and basically spend the amount of money that fought on the economy, and I relish the prospect of we are prepared to raise in taxation, which is sound and doing so, because I will be able to remind people of sensible economics. Opposition Members make the criticism what the economy was like in 2010 when the coalition that we have not got there yet, and that we have not got Government took office. We had seen a dreadful financial there as quickly as we can. They are absolutely right. It situation, which had partly come about as a result of a worries me, and it should worry everyone, that we sub-prime housing market, but in fact had really come continue to borrow just over £100 billion a year, albeit about because of a loss of confidence in all sorts of on a rather larger economy now, so with a lower percentage financial institutions and Government. Much of that of GDP. had happened because of the very high levels of borrowing that the previous Government had undertaken. Had Geraint Davies: Will the hon. Gentleman accept that they not undertaken those large levels of borrowing it is not just a matter of not getting there? Will he accept prior to the financial collapse, we would have been that the current Government have, in four years, borrowed in a much stronger position to do something about more than the previous Government did in 13 years, it in 2007. and that debt as a share of the economy has moved 33 Welsh Grand Committee7 MAY 2014 The Budget 34 from 55% to 75%, and by next year will be 80%? It is a not seem to get this. Everyone in the private sector who complete disaster. His Government’s incompetence has has ever worked and has had a pension is a shareholder, stagnated growth. even if they do not realise it. Therefore, the price of shares really matters. It is important that shareholders David T. C. Davies: I accept that this Government do well. There will be many people who work for Royal have continued to borrow a lot of money. I should like Mail who are shareholders. There will also be many to see borrowing lower. I do not accept the hon. Gentleman’s other people working in all sorts of industries who will, second figure. I should want to look at it carefully. It although they do not know it, have become shareholders does not strike me as correct. The hon. Member is in Royal Mail, because the pension funds in which they inadvertently drawing attention to the incoherence of have invested their pensions will have taken shares in his own party’s policies. On the one hand he complains Royal Mail. It is therefore good that the share price has about the amount of money that we borrow—I tend to gone up. It is good for people who will be relying on agree that we are still borrowing too much—and yet his shares for their pensions. colleagues, or possibly even he himself in a minute, will suggest that we borrow even more money and spend David Morris: Is it not a fact that the Opposition even more money. Opposition Members seem to want keep blaming the crash of the stock market for the woes to have it both ways. They want to criticise the Government of the economic climate, and they are now saying that for the amount of money they continue to borrow, and shareholders are evil in some way? It is contradictory. they want to criticise the Government for not spending enough. In their economic world, they believe that they can borrow vast amounts of money and spend vast David T. C. Davies: It is similar to the attacks on amounts of money without it ever appearing on the bankers. At the moment we are getting 10% or so of our nation’s balance sheet. That suggests that they have not tax revenues from financial services, so it is an important learned the lessons of the last financial escapade into industry. None of us may like the idea of a load of which they drew us. people driving around in brand-spanking-new Ferraris. I heard some good Opposition comments. All is not I drive a Ford Focus myself. I have looked at a Ferrari rosy in the garden. I have some concerns about zero-hours or two, but it is never going to happen in this job—and contracts myself, and I am a true believer in capitalism. nor should it, I say to the representatives of the Western I will shout for capitalism because I think that it has Mail. delivered a huge rise in living standards across the However, it is worth remembering that all these people world. who are driving around in a Ferrari that cost £100,000 or so—and there are not many of them—will have paid Mrs Moon rose— 45% in tax to have earned that money. They will have paid a bit more than that, with their national insurance. They will have paid VAT on the Ferrari as well, and they David T. C. Davies: I shall give way, but I shall make will pay tax every time they spend their money. Now, we the point because I suspect that the hon. Lady may can make a simple decision: do we want these people agree. It is not the role of the Government to get here, annoying us slightly as we drive around in our involved in a private agreement between employer and Ford Focus, or do we want them to go to Dubai and employee, but no employer has the right, if it wants to take all their money with them? I would rather have stipulate that it will offer flexible hours, to say that an 50% of their cash and spend it on improving public employee cannot work for anyone else. That strikes me services and schools and hospitals in Wales. as unfair and something that we should be looking at.

Mrs Moon: On fairness, would the hon. Gentleman Huw Irranca-Davies: The hon. Gentleman makes his agree that one of the great examples of this Government’s own robust case on behalf of capitalism, but one of the unfairness was the under-selling of Royal Mail? That disappointments that I had from the Budget was that jewel in Britain’s crown was handed to the private sector there was not a clearer statement on the need for that and is now in the hands of hedge funds who are going progressive tax regime. I agree with the hon. Gentleman. to destroy a service that people valued. I want to see every person in Ogmore earning huge amounts of money. I want to see them doing that and contributing their taxes, because not everyone can rely David T. C. Davies: No, I do not accept that. The on private health care or make the choice to send their Government had a difficult calculation to make. Had children to private school. I want them to fund the they set the price too high, the whole sale could have public NHS, the local state schools and so on. That is flopped. The hon. Lady talks about hedge funds. I have why I regretted the fact that we did not say to those been hearing a lot about bankers and hedge funds. wealthy people—and I want all my constituents to be Yesterday the Leader of the Opposition talked about wealthy—“Let them pay 50p.” It is not only the measure shareholders in AstraZeneca in rather a derogatory of the difference between 47p and 50p, it is the fact that fashion. Our Government now need to address the idea it is a statement of intent of good capitalism. that shareholders are a bunch of people in top hats walking around the streets of London. A shareholder is anybody who has ever worked in the David T. C. Davies: If it is a statement of intent that private sector and has a private sector pension. It does leads some of those people to pay less money overall not surprise me that so many Opposition Members, and reduces the amount of money that we have, then it whose experience of work is largely in the public sector is self-defeating. All of us as MPs will have less money and who have guaranteed inflation-linked pensions, do to spend on the public services that we all value. 35 Welsh Grand CommitteeHOUSE OF COMMONS The Budget 36

Mr Llwyd: I just want to make the point that before I The Secretary of State for Wales himself brought up came to Parliament I ran two private businesses rather the issue of the carbon floor price and the intensive successfully, so I do not actually fall into the public energy subsidy. He is obviously a believer in the climate sector bubble that the hon. Gentleman refers to. May I change issue. I just want to ask him a few questions refer back to what he said about bankers? He was on the about it. The reality is that there has been no increase in brink of saying that if we have to keep them here we temperature since 1997. The Intergovernmental Panel have to overpay them. If some of the bonuses were cut on Climate Change is now saying that most of the rise back by a couple of hundred thousand pounds, I do not caused by carbon dioxide emissions came in the last see them running away to Hong Kong or anywhere part of the previous century, meaning that the rise else—and if they do, good blinking riddance. between 1910 and 1940 and the fall between 1940 and 1970 have not been explained by anything that was David T. C. Davies: I have a few shares in Barclays going on with carbon dioxide. myself—not very many, I hasten to add—and I was a Opposition Members may laugh and sneer at that, bit taken aback at the talk of bonuses, especially because but I have spent a long time looking into the issue. I feel the share price has not been brilliant over the last few strongly about it, because it is affecting all the economic months. As a shareholder and someone who has invested decisions we are making at the moment. I would ask my money because of low interest rates—there is not this question, as I have of leading scientists, of hon. much point putting it in the bank—I would have a few Members: how much of the small rise that has taken questions to ask about that myself. However, it is up to place over the past few hundred years has been the the owners of those companies to ask those sorts of result of the fact that we were coming out of a little ice questions and they should do so. age at the same time that we were industrialising? What caused that rise at the start of the 20th century, which Geraint Davies: Will the hon. Gentleman give way? has never been properly explained? Why were temperatures going down between 1940 and 1970, leading to predictions David T. C. Davies: Let me make one point about of another ice age? Why has there been no increase in bankers. It is all very well running them down, but all of temperature whatsoever in the past 17 or 18 years? us, especially Opposition Members, need those people. There are many questions about the matter that we Not just to get the 10% of tax revenue that they deliver should be asking before we hamper our manufacturing to us, but because Opposition Members want to borrow industry. even more money from those very same people.

Several hon. Members rose— Albert Owen (Ynys Môn) (Lab): As a member of the Select Committee on Energy and Climate Change, I do David T. C. Davies: Let me finish. One of the main ask such questions. I have to come to conclusions on the points of the Government’s policy has been to engender evidence given—that 98% of scientists are right, and a certain amount of confidence in the British economy that there will always be a small percentage who disagree. and to reassure people that we are going to be in a Regarding the carbon floor prices, which the hon. position to pay back the very large sums we are borrowing. Gentleman is absolutely right to raise, we heard from The thing that keeps me up at night is the prospect that the Government during the Budget that they have helped one of these days, at one of the debt auctions, we go businesses. The Government introduced the prices in along and the people we borrow money from say: the first place, which caused some of the problems that “We’re not confident that you can pay that money they are taking away. back”. If that happened, confidence would drop very quickly in this day and age. David T. C. Davies: I agree with the hon. Gentleman. Let us accept the science for a minute; I do not, but Mr Llwyd: May I just make the point that I am not let us accept it for a minute. Some 97% of scientists—I envious of Ferraris or anything else? What the hon. include myself—agree that CO2 is a warming gas; that Gentleman says seems to ignore the fact that the big there is more of it; and that there has been a slight concern out there among the public is that those who increase in temperature. That is about the only agreement were perceived to have largely caused the problems that there is. However, let us accept all the other stuff that we are in, are now being overpaid again, and those on comes out as well. It still does not make much sense for the bottom rung, subject to the bedroom tax and the the UK to act alone on the issues. tightening of all manner of other things, have to pay for it all. That is the problem we are dealing with. Continuing Albert Owen: It does not act alone. to overpay them is not going to help that perception, either. David T. C. Davies: It is very much acting alone. What The Chair: Before you continue, Mr Davies, I appreciate we would need is a global agreement, but what we have that this is still all part of the broader context, but can at the moment is countries all over the developing world we start narrowing it down to the subject matter of the emitting CO2. There is a bigger increase in China every particular financial instruments and propositions that single year than the total amount of CO2 we emit. India are in the Budget as they currently relate to Wales? is not interested in any kind of agreement. The Americans have cut their CO2, but only because they have embarked David T. C. Davies: I would like to come back to this on fracking. another time, but may I make a few quick comments in the six minutes that I have left? These are not so much Albert Owen: That is what we hear a lot in the climate about the economic climate but the geographical climate, change debate. Britain has 1% of the population but which has a relevance to the Budget. creates 2% of the pollution. If India and China were to 37 Welsh Grand Committee7 MAY 2014 The Budget 38

double their population and their output of CO2, the 4% cut in our income now in order to allow a world that world would be in a very difficult place. Britain is is going to be much wealthier than we are at the leading, but it is leading internationally. moment to be 2% wealthier than it otherwise would be.

David T. C. Davies: When the hon. Gentleman says Huw Irranca-Davies: I must confess that I have not Britain is leading, what he actually means is that it is seen the deliberations of working group III. doing things and hoping that others will follow. I am In answer to the hon. Gentleman’s question as to not in the least bit confident that they will. Let them what good reason there is for the package that has been follow us first. Let them all impose carbon floor prices introduced, I will suggest one to him. Regardless of the and energy taxes, and then let us think about it. At the issues in the climate change debate on what is causing it, moment, we are acting alone. We are doing so in a way in the situation we are in, in Europe, we should be doing that is hitting our manufacturing industries. We have what other nations are doing, which is to have a package now come up with the frankly ludicrous policy of that protects energy-intensive users. The good reason saying, “We have brought in all sorts of taxes to try to for doing so is so that we export neither those jobs nor reduce carbon emissions, but wait a minute—there are the good work of people such as Tata Steel, which is some important manufacturing companies here that doing tremendous work on energy efficiency and on will be hit by the very taxes we have introduced, so we driving down its energy costs. will give them some money back.” That does not make a great deal of sense to me. David T. C. Davies: That is exactly the point I am making. The hon. Gentleman has probably put it better Huw Irranca-Davies: Will the hon. Gentleman give than I have. way? I am pleased to associate myself with this Government’s economic policy. I do not come along here to sing David T. C. Davies: Yes, but may I first refer to the paeans of praise about everything, and if I can see a IPCC reports, which I am sure the hon. Gentleman has little bit of a problem— seen? AR5 from working group II says that the cost of climate change by 2100 is likely to be between 0.2% and The Chair: Order. 2% of gross domestic product of the whole world. However, that is a much richer world than the one we are living in at the moment, because it presupposes that David T. C. Davies: I have finished my speech. countries such as India, China and Brazil will have gained the same standard of living as ours and will The Chair: Fine. We have exhausted the time for this therefore be emitting a lot more carbon, and I very morning’s discussion; no, it is not vest off day yet. We much hope that they are. will resume at 2 pm. However, working group III has said that if we want to tackle the alleged problem, which is not even increasing 11.25 am temperatures at the moment, the total cost to us could The Chair adjourned the Committee without Question be anything between 1% and 4% right now. I do not put (Standing Order No. 88). think that it would be at all wise for us to take a 1% to Adjourned till this day at Two o’clock.