7. Welsh Conservatives Debate: Regional Economic Inequality

– in the Senedd on 6 February 2019.

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(Translated)

The following amendments have been selected: amendment 1 in the name of Rebecca Evans, and amendments 2, 3, 4 and 5 in the name of Rhun ap Iorwerth. If amendment 1 is agreed, amendments 2 and 3 will be deselected.

Photo of Ann Jones Ann Jones Labour 4:46, 6 February 2019

Item 7 on the agenda is the Welsh Conservative debate on regional economic inequality, and I call on Russell George to move the motion.

(Translated)

Motion NDM6959 Darren Millar

1. Notes that regional economic inequality remains stark across Wales, as evident in the latest GVA figures.

2. Regrets that the Welsh Government’s policies have failed to address economic inequalities between regions in Wales.

3. Welcomes the contribution that the Cardiff city region deal, the Swansea Bay city region deal, a north Wales growth deal and a mid Wales growth deal will make to addressing regional inequality in Wales.

4. Calls on the Welsh Government to:

a) work constructively with the UK Government to deliver growth deals in Wales;

b) review the economic action plan to incorporate a strategy to grow wages and economic prosperity in all parts of Wales and address economic inequalities between regions; and

c) promote a regional development policy post Brexit which supports deprived communities across Wales, including those outside west Wales and the valleys.

(Translated)

Motion moved.

Photo of Russell George Russell George Conservative 4:46, 6 February 2019

Thank you, Deputy Presiding Officer. I move the motion in the name of my colleague Darren Millar. There is quite a bit we can agree with in the Government's motion today, but we can't support it because it deletes the entirety of our motion. We will not be supporting amendments 2 or 5, but we will be supporting amendment 3, and are interested in hearing more detail on the Plaid Cymru proposal for a regional investment Bill, which is contained within their amendment 4.

Deputy Presiding Officer, economic output per person varies widely across Wales. There is a marked contrast between gross value added per capita in the north and the south-east corners of Wales, our Valleys communities, and our rural communities in mid and north Wales. If I can give some examples of this, gross value added per capita in Anglesey is just under half that of Cardiff, and numerous regions of Wales lag behind the wealthier parts of the nation. There is also a clear geographical division in wealth in Wales, and there is also, sadly, an urban and rural divide. The latest figures indicate that Wales's less well-off regions and local authority areas are subject to very poor growth rates, and this is, of course, the responsibility of the Welsh Government. We need to put in place an economic strategy capable of both closing the gap and improving the economic fortunes of Wales as a whole. By contrast, some poor and very economically challenged regions of England saw growth in GVA per capita, so it's simply not correct to say, as in amendment 2—what the Government is trying to accomplish—that it's the UK Government's economic policies that are contributing to these internal regional inequalities within Wales. And it's clear that despite similar structural challenges, many poor regions of England are experiencing robust growth, while similar regions of Wales are not only failing to grow at a significant rate, but some are actually contracting, which is very, of course, concerning. So, I simply don't accept Plaid Cymru's argument that it is somehow the UK Government's economic policies that are a contributing factor towards this. 

Let's look closer, also, to home, to the Welsh Government's economic policy over the last 20 years. There have been a number of drivers here. We've already had, of course, three major economic strategies launched by the Welsh Government since the creation of this Welsh Parliament. And I put it forward today: all have failed to boost the regional growth, failed to drive forward Wales's economic Welsh economy, and failed to create sufficiently well-paid jobs, and failed to create productivity. Wales is currently the weakest, slowest growing economy in the UK, still lagging behind Scotland considerably. I don't think any of us in this Chamber want to see that, so I don't say that with any satisfaction. We want that to change. Firms that have invested in this country should have been integrated into domestic supply chains in order to help embed that outside investment in local communities, and I just believe that the Welsh Government has failed to properly capture that inward investment, which has meant that their strategy has failed to close the economic gap between Wales's regions and also failed to increase prosperity in Wales in general. For example, despite huge injections, of course, of public funds into our enterprise zones across Wales, they have failed to deliver on their key objectives. The zones were meant to build capacity in specific sectors of the Welsh economy, including manufacturing, energy and professional services. They were are also intended to attract firms to certain areas of the economy as well. There have been some examples of successful areas within the enterprise zones, but it's a mixed bag. That's what I would contend. But the economic data makes it clear that enterprise zones and their associated funding have not made the impact on economic growth that we would have expected.

So, on these benches, we also do welcome the contribution that the Cardiff, Swansea bay, north Wales and mid Wales growth deals will make to addressing regional inequality in Wales, and I'm sure that the Minister will agree with that. These city and growth deals represent a game-changing, I think, approach to regional development because they have the potential to help develop small and medium-sized enterprises, larger firms and transport infrastructure across Welsh local authorities. And I do give an example, of course: last week, the Growing Mid Wales partnership visited the Senedd to showcase their produce and services from businesses across Powys and Ceredigion. That was a great opportunity, I thought, to underline the need for public investment and growth for a mid Wales growth deal. I thank the Minister for meeting the delegation, meeting businesses, and speaking at that event as well. These growth deals, of course, have a strong regional focus and are centred on building collaborative partnerships between neighbouring local authorities in order to raise that regional growth and prosperity. And I am grateful, also, to the Minister for the way that he has engaged with me and other stakeholders on this issue. And in this motion, we call on the Welsh Government to continue to build a positive, open and collaborative relationship with the UK Government and major UK civil service departments to help enable long-term success for the growth deal initiatives across Wales.

Deputy Presiding Officer, the Minister wouldn't expect me to heap too much praise on him, and, in concluding, there are a number of areas where we feel that the Welsh Government's approach to economic policy must be improved significantly. The Welsh Government's economic action plan rightly begins to turn Welsh Government attention towards boosting business support for Wales's SMEs, consolidating that finance mechanism together, improving public procurement and strengthening the Welsh supply chain. However, I contend that it must also be developed further to ensure that it outlines clearly how its central themes and content will help raise wages in Wales going forward. The new regional offices also need appropriate resourcing and their work plans must dovetail with existing policy measures to boost regional growth. And there needs to be greater funding, I think, for business support in Wales also, going forward, in my view. So, while the economic action plan represents a welcomed change in the direction in relation to Welsh Government approach to developing the Welsh economy, there are many areas that must be bolted on to that strategy if Wales's regions are to prosper and the economy of Wales is to thrive going forward. I look forward to Members' contributions in this debate this afternoon and remain open-minded, again, to Plaid's amendment 4, with regard to which way that we may vote this afternoon.

Photo of Ann Jones Ann Jones Labour 4:54, 6 February 2019

Thank you. I have selected the five amendments to the motion. If amendment 1 is agreed, amendments 2 and 3 will be deselected. I call on the Minister for Economy and Transport to formally move amendment 1, tabled in the name of Rebecca Evans. 

(Translated)

Amendment 1—Rebecca Evans

Delete all and replace with:

To propose that the National Assembly for Wales:

1. Recognises the importance of strong, resilient regional economies across all parts of Wales as a driver of inclusive growth

2. Notes the cross-government measures set out in the Economic Action Plan including the appointment of Chief Regional Officers and teams in Welsh Government to support Regional Economic Development across Wales

3. Notes the important role for City and Growth Deals in driving regional economic growth when they are coordinated alongside wider interventions such as infrastructure, transport and skills.

4. Notes the recent announcement that the OECD is supporting the development of regional economic development policy in Wales based on international best practice

5. Calls on the UK Government to address inequalities in infrastructure funding between the nations and regions of the UK and do more to spread investment opportunities equitably across the country

6. Calls on the UK Government to respect the devolution settlement and ensure that strategic decisions relating to the management and administration of replacement structural funding to address regional economic inequalities are made by the Welsh Government.

7. Notes the development of regional indicative budgets for Economy and Transport investment across Wales.

(Translated)

Amendment 1 moved.

Photo of Ann Jones Ann Jones Labour

Thank you. I call on Rhun ap Iorwerth to move amendment 2, 3, 4 and 5, tabled in his own name.

(Translated)

Amendment 2—Rhun ap Iorwerth

Delete point 2 and replace with:

Notes that the UK Government's policy of austerity, along with the Welsh Government's mismanagement, has led to a large increase in economic inequalities between Wales's regions.

Amendment 3—Rhun ap Iorwerth

In sub-point (a) in point 4, after 'the UK Government' insert 'and local authorities'.

Amendment 4—Rhun ap Iorwerth

Add as new point at end of motion:

Calls for a regional investment bill, with the aim of ensuring fair financial investment across all of Wales.

Amendment 5—Rhun ap Iorwerth

Add new points at the end of the motion:

Welcomes the fact that the Arfor project board has held its first meeting and has agreed on an outline programme of activities for the next two years.

Notes the fact that £2 million has been earmarked in the budget for secretariat support and investment  for Arfor during 2018-19 and 2019-20 as Plaid Cymru's budget priority with the Welsh Government.

Confirms the importance of maximising the undeniable link between economic prosperity and linguistic prosperity in Welsh-speaking western areas of Wales.

(Translated)

Amendments 2, 3, 4 and 5 moved.

Photo of Rhun ap Iorwerth Rhun ap Iorwerth Plaid Cymru 4:55, 6 February 2019

(Translated)

Thank you very much, Deputy Presiding Officer. I’m pleased to participate in this debate. May I thank the Conservatives for bringing this topic forward today? Given that I have the job of trying to persuade the Conservatives to support our amendment 4, I’m sure I shouldn’t say anything too negative about the Conservatives, but I’m afraid that I do have to start by pointing out the irony that the Conservatives have brought a motion forward criticising the Welsh Government for its failure in creating equality and regional balance in Wales, when the Conservatives’ own record, like the Labour Party, one has to say, at the UK level, is one of having created an unprecedented level of inequality.

In a way, what the Conservatives are saying today is that Wales is unique within the UK in terms of the kind of inequality that exists. But if you look at the inequalities within Britain as compared to many of our European partners, Britain, or the United Kingdom, is far more unequal, economically speaking, than Italy, although Italy is known as a state where inequality is rife, with a traditional difference between the prosperous north and the poorer south. Britain is less equal than Germany, where still, after a quarter of a century or more, there is great inequality between the old east and the west, where the gross domestic product of the east is still only around two thirds of the GDP of the west. But the UK is still not achieving the same levels of equality.

If we look at the reality within the UK, at the sub-regional level, the per capita output is eight times greater in the west of London than in the west of Wales and the Valleys. There is no similar difference anywhere else in the European Union, so, I’m sorry, the Conservatives can’t argue that in some way they are a party that promotes economic equality, because the Conservatives, as a British party, and Labour, as a British party, have failed to secure that kind of equality that I want to see in Wales in the future. I am confident in Wales’s ability of being a nation state that can aim towards that sort of equality that is only a pipe dream at a UK level. The last thing I want to see is Wales in some way becoming a nation where we have inequality within our own nation that would be similar to what exists within the UK more widely. I don't—[Interruption.] Yes, of course. 

Photo of Russell George Russell George Conservative 4:58, 6 February 2019

I understand and appreciate what you're saying, but you're also suggesting that both us on these benches and Labour benches are UK parties and you're a Welsh party, yet our motion is about the inequalities in Wales. We're just talking about the inequalities across the country.

Photo of Rhun ap Iorwerth Rhun ap Iorwerth Plaid Cymru

It is incumbent on me to point out the irony in the position that you take as a party that has wholesale failed completely to introduce the kind of equality on a UK level that you say we want to see in Wales. There's no hiding that both main UK parties, in governing for decades, for generations, have failed to bring equality to the UK. And you're quite right, we need to talk about how we bring that kind of equality to Wales.

Photo of Rhun ap Iorwerth Rhun ap Iorwerth Plaid Cymru 4:59, 6 February 2019

(Translated)

By the way, I’m not one who likes to talk about everything going to the south—it’s a very populist thing to do in north Wales. It’s not a north/south split that we have in Wales, but there is a difference between the east and the west, where there is prosperity in the north-east and the south-east that does need to be disseminated to the rest of Wales. But we must seek ways and means of doing that.

I will briefly mention the regional renewal Bill, mentioned in amendment 4, that we are eager to see delivered. The figures demonstrate that investment in infrastructure and in transport and so on is inconsistent across Wales at the moment. Russell George, you referred to the figures and that lack of equality in terms of investment in various parts of Wales. What I would want to see is a Bill being developed whereby there would be a requirement on Government to demonstrate that they do give due regard to regional fairness and equality in their expenditure decisions in the same way as the future generations Act requires the Government to think whether their decisions are beneficial for future generations. We should be thinking regionally in that way, and I would welcome your support on that principle of having that kind of Bill.

The clock is against me, although I did take an intervention from Russell George. Siân Gwenllian will be speaking specifically about the plans that we have for the creation of economic activity in the west of Wales, but we must be clear what kind of Wales we want to see. It has to be a Wales that is prosperous, of course, but also brings prosperity to all parts of the nation. That's why I appeal to you to support our amendments today.

Photo of Mohammad Asghar Mohammad Asghar Conservative 5:01, 6 February 2019

Supporters of devolution in the late 1990s claimed that the relative failure of the Welsh economy could only be addressed by tailor-made solutions created here in Wales. Sadly, under successive Welsh Labour administrations, that has not proven to be the case. The Welsh economy has underperformed over the past 20 years and has failed to catch up with the UK economy as a whole. As a result, Wales remains the poorest country in the United Kingdom. Not only has the Welsh Government failed to significantly close the GVA gap between Wales and England, it has failed to tackle the regional economic inequality that still exists in Wales.

The contrast is stark. Wales is economically divided between north, south, east and west, urban, rural and whichever way you want to think of. In my own region of South Wales East, the division in clear. In 2017, GVA per head was less than £15,000 in the Gwent Valleys. In Newport, the figure was over £23,000 per head. It is a fact that, if you compare the GVA per head of all the local authorities in the United Kingdom, Blaenau Gwent is in the bottom five. Earnings in Wales have remained the lowest in the whole of the United Kingdom. Again, taking Blaenau Gwent as an example, more than 30 per cent of workers in the borough are paid less than the voluntary living wage.

I recognise that the Welsh Government has introduced a number of initiatives to try to address the problem of regional inequality. They have all had grand titles: 'A Winning Wales', 'Wales: a Vibrant Economy', 'Economic Renewal: a New Direction', but they all fell by the wayside and failed to deliver the transformation the Welsh economy needs.

This failure is exemplified by the poor returns received by the Welsh Government policy of enterprise zones. Since the creation of these zones in 2012, £221 million of public money has been allocated to support this policy. In Ebbw Vale alone, nearly £95 million has been spent to create, safeguard or assist just 390 jobs. In spite of the injection of large sums of public money, enterprise zones have failed to meet their key objectives.

Deputy Presiding Officer, they were meant to build the capacity of specific sectors of the Welsh economy and attract funds to those designated areas, but they have failed to make any significant impact on economic growth. Previous Welsh Government strategies have pledged to explore and exploit the job-creation potential of major infrastructure investment. However, one such project with the potential to deliver huge benefits to the economy remains kicked into the long grass. The M4 relief road is currently bogged down in a combination of Welsh Government dithering and indecision of approach.

This Welsh Government has lost its purpose and sense of direction. No wonder Alun Davies AM, who is not here at the moment, said, in his words—it's a quote—

'moving away from that commitment to reform and…looking at the lowest common denominator.'

Deputy Presiding Officer, Wales needs an economic strategy for growth, one that makes clear proposals and sets targets so that progress towards those goals can be measured. Unless the Welsh Government does this, the Welsh economy will continue to underperform and we will continue to languish at the bottom of the economic league. 

Economic equality is not only in money and development, but also in education, employment, earning, income, poverty and wealth in Wales. The number of people living under the poverty level is much higher in Wales than any other devolved nation in the United Kingdom. Similarly, for poverty amongst children it's the worst area of the United Kingdom. Wealth distribution—the richest people in Wales, 10 per cent, their earnings are below £100,000. So, Deputy Presiding Officer, I think there are a lot of things this Government needs to do before we can say that equality in Wales has been achieved—equality of wealth distribution among Welsh people. Thank you. 

Photo of Mike Hedges Mike Hedges Labour 5:06, 6 February 2019

Thank you, Deputy Presiding Officer. I again welcome this debate; I don't think we talk about the Welsh economy enough.

We have, in Britain, London and the south-east of England amongst the wealthiest regions in Europe, and west Wales and the Valleys amongst the poorest. The only regions and nations to make a net contribution to the Treasury are London and the south-east. We also know that Cardiff provides substantial employment for the surrounding areas. Listen to the radio in the morning travelling in to Cardiff and talk to people travelling on the Cardiff Valleys lines—you've got the traffic jams continually coming in, you've got people crammed onto trains. I'm sure that if Leanne Wood was here she'd interrupt me and say she's got personal experience of that. But should large parts of south Wales solely commute to Cardiff? 

If we were having this discussion 50 years ago, we would be in a country where coal and steel employed hundreds of thousands of people, where in Merthyr they'd be talking about Hoover and in Neath Port Talbot they'd talk about BP as major employers. The decline of steel and coal and other major employers have left a huge gap in the Welsh economy, which has not been adequately filled.

We know three things about the Welsh economy. Firstly, we are poor at developing medium-sized companies into large, but Admiral has shown it can be done. Secondly, that we underperform in terms of employment in key economic sectors associated with above-average wages—ICT and professional services are two. Thirdly, that economic wealth is not evenly distributed across Wales.

I speak as someone who has enthusiastically supported the Swansea city deal and I am pleased with the way it is generally progressing. The aim of the Swansea city deal is to address the integrated universal themes and challenges of energy, health and well-being and economic acceleration by harnessing the transformational power of digital networks and the asset base of Swansea bay. It is estimated that the city deal investment could lever in a total of around £3.3 billion of output and £1.3 billion of gross value added for Wales, while supporting around 39,000 jobs in the region. Even if the city deal fulfils every ambition and all the investment and jobs materialise, it will not solve the economic problems of the Swansea bay city region.

Can I just talk about, as I often do, one key industry that is not geographically constrained and has the ability to generate huge wealth, and that is ICT? There is a tendency for ICT companies to cluster together, not just in Silicon Valley—and if you've ever looked at a map, Silicon Valley's got nothing special about it apart from the fact that some companies started there and more and more went there. It doesn't have any of the great advantages. We had steel in south Wales because we had the coal and we had the iron ore—they have not got great advantages. But we know they cluster together. They're also around Cambridge university—you'll say, 'Well, we can't really be compared with Cambridge'—but also, computer games around Dundee. Now, I'm sure there are very few places in Wales that can't be compared with Dundee. In Wales, medium-sized enterprises in the sector have performed strongly with a 92.8 per cent increase in turnover between 2005 and 2015. There is a need to turn some of these medium-sized ICT companies into large ICT companies. We know that ICT is a high-paying sector and that superfast broadband roll-out across the Swansea bay region is making it possible for ICT companies to develop.

With the quality of ICT graduates being produced in the Welsh universities, it has to be a severe disappointment that Wales has a lower proportion of its population working in ICT companies than the rest of the UK. If we are to make the Swansea bay city region and Wales an obvious home for ICT, then we need to keep these graduates. We're turning out these excellent graduates and London, Birmingham, Manchester and Cambridge are getting the benefit of them. We need Wales to get the benefit of them. If Wales had the same proportion of its population working in ICT as the UK as a whole, it would have approximately 40,000 more ICT employees than it has. That would have a huge effect on GVA across Wales. 

Developing an economy is about developing and promoting high-value economic sectors. We will not develop a successful economy and high GVA on low pay and seasonal work. We therefore need a strategy for targeted investment in order to get these highly paid jobs. Is it possible? Why does Mannheim in Germany have a GVA approximately three times that of west Wales and the Valleys? Why does Aarhus in Denmark have a GVA approaching twice the GVA of west Wales and the Valleys? Why are these places successful? Because they actually have projects and plans, and they are good at certain things. What we need to do is work out what we're good at, and develop accordingly. Far too often, we talk about trying to have other—. If I asked what the main Welsh economic sectors were, I think it added up to about 80 per cent of the Welsh economy last time I looked. We need key sectors, and to promote key sectors.

Finally, if you keep on doing the same thing, you will keep getting the same results.

Photo of Mark Reckless Mark Reckless Conservative 5:11, 6 February 2019

In point 1 of our motion, we speak about increasing inequality as evidenced by GVA, then in point 4(b) we speak about our objective to grow wages and to grow prosperity across Wales. I'd just like to emphasise that there is a difference between GVA and wages and prosperity, because GVA looks at production in a particular area. As I think Mike mentioned, a lot of people commute into Cardiff from outside, and the value of what they produce is captured within the Cardiff GVA, rather than, say, the west Wales and the Valleys GVA, for some of those Valleys commuters. And I think this is something we need to work with, rather than something we can sensibly resist. Mike was also right in saying that various industries—and he gave ICT as a well-paying one—tend to cluster together, and that trend has become greater over at least the last 20 years, and we have seen greater benefits to agglomeration. We need to work with the grain of that, rather than set our face against it, if we are to promote wages and prosperity of those that we represent. 

Photo of Rhun ap Iorwerth Rhun ap Iorwerth Plaid Cymru 5:11, 6 February 2019

Thank you for taking an intervention. Is that good enough reason for you to support our amendment today, calling specifically for creating those centres of agglomeration in various sectors, down particular areas of rural Wales? 

Photo of Mark Reckless Mark Reckless Conservative 5:13, 6 February 2019

I don't rule out supporting it; we'll consider the debate and take a decision. But it is more difficult to create those benefits of agglomeration in rural areas because that agglomeration needs lots of people working together in a confined space. To a degree, we have that in Cardiff, and many of my constituents in south-east Wales commute into Cardiff to often reasonably well-paying jobs, and that's something I welcome. But I think it's something Welsh Government needs to support, and this continued foot-dragging and failing to make a decision over the M4 relief road is one major disincentive and inhibitor to growth in the Cardiff city region and beyond.

Similarly, I support the south Wales metro; I think that's an excellent idea. I'm looking forward to Transport for Wales and Welsh Government pushing on with that as quickly as possible. Yet, we also in south-east Wales see people who commute into Bristol and, from that perspective, the abolition of the tolls on the Severn bridges is absolutely fantastic. And we are seeing in Newport really significant growth; more than one in six of every new home in Wales is now being built in Newport. Now, many of those homes are being occupied by people who are commuting—again, to relatively well-paid jobs, often—in the Bristol region. Mike spoke about London and the south-east as more than average but, actually, Bristol, while not a region, is also significantly above the UK-wide GVA, and is again good for the IT jobs. And I think it's really important across south Wales—from Swansea to Cardiff to Newport to Bristol—that we link that together as a region far better than we do now, and that is one really important way to drive prosperity, at least for that area of Wales. 

Can I just turn briefly to the issue of city deals? I thought it was a fantastic event we had last week with the mid Wales growth event and I was delighted that Russell encouraged me to come to that, and congratulations to him and others involved in showcasing all those really impressive businesses from across mid and west Wales. But we're told that there are only three businesses in that region that have more than 200 employees. Ceredigion and Powys together have a far smaller population than any other region we're looking at for city deals, and I just say to Welsh Government that they need to take that into account in terms of how they work with them. We can't have a single template for how these deals work and I think those two councils need significantly more support from Welsh Government in knitting that deal together and making it work for their local area.  

Photo of Mike Hedges Mike Hedges Labour

They also have two universities, and perhaps they could start using the benefit of those universities to help drive wealth. 

Photo of Mark Reckless Mark Reckless Conservative

I agree with the Member's point. The city deals started back with the first eight of them being agreed within the UK in July 2012. Now those were eight deals in England, including places, such as Bristol and Nottingham, of a similar size to Cardiff and not much bigger than Swansea. Why did it take so long for this concept then to be developed in Wales? In England, between July 2012 and that first lot, we saw another 20 deals coming through by July 2014. Yet it was only in March of 2017 that we had both the Cardiff and Swansea deals up and running, and we're still working to get the north Wales deal, and particularly the mid Wales deal, up to that point. So, I'd just say: pleased to see the degree of commitment and support now, I hope we will see more of that, but why did it take so long? And let's push on and really have an urgency about this.

Photo of Mr Neil Hamilton Mr Neil Hamilton UKIP 5:16, 6 February 2019

We've just had two very interesting speeches from Mark Reckless and Mike Hedges, all of which I agree with. I often think, if Mike Hedges were the leader of a political party, I might be tempted to join it, because I often agree with a lot of what he says in the Chamber. I hope that doesn't do fatal damage to your career. But I think he made some very positive, practical points.

It's too easy to talk about how Wales is at the bottom of the league of so many of the economic tables and how it's gone backwards in the last 20 years, and how there is an enormous disparity of income between, for example, west Wales and Cardiff and we need to plug the gap. But the reality is that what Wales needs to do is to raise the level of wealth creation in the economy and therefore to raise income levels more generally. [Interruption.] Sorry, I didn't—. I'm sorry.

So, this is something that has spectacularly failed to happen over the last 20 years. Now, I'm not going to heap all the blame on the Welsh Labour Government because, obviously, it doesn't have all the levers of economic power in its armoury. Unlike the Irish Republic, for example, it can't reduce corporation tax, or change the structure of the tax to favour certain growth industries of the future. And I've actually, over the years, become more positive towards devolution than I was 20 years ago, not just because I've got elected to this place, but because, if devolution were used in an imaginative way, and even extended in certain respects, then I can see that we could change the overall economic background in terms of taxation and regulation to give ourselves a relative advantage—[Interruption.]—compared with our neighbours. Yes, sure.

Photo of Andrew RT Davies Andrew RT Davies Conservative 5:18, 6 February 2019

You're quite right to point out corporation tax as being one big-ticket item that the Welsh Government don't have responsibly out of, but business rates is something that they do have responsibility out of and could make a massive difference to many small businesses the length and breadth of Wales, and yet they've chosen not to do it.

Photo of Mr Neil Hamilton Mr Neil Hamilton UKIP 5:19, 6 February 2019

I entirely agree with that point. That could be said for the United Kingdom as a whole of course, that business rates are a property tax that is wholly outdated and bears no relationship to people's income and therefore their ability to pay. Getting from where we are to where we want to be, of course, is not necessarily an easy thing to do, but, nevertheless, I do think that for a country like Wales, which is at the bottom of the table of nations and regions of England, we do need to have some imaginative response from the United Kingdom Government—as well as from the Welsh Government—who do have the levers of economic power in their hands, and it would be possible for them to devise some kind of package for Wales, and not just Wales, but for Scotland, and for other regions in England as well, which gives them a relative advantage, or reduces the relative disadvantage that they've inherited from history.

As Mike Hedges pointed out, Wales lost in its heavy industry lots of jobs that were well paid and were very large employers of labour, and they've not been replaced by anything that could compare with them. Unfortunately, not just because of EU regulations but because—and the UK Government and the Welsh Government enthusiastically accepts this—we have a crazy energy policy in this country where we insist on adding to industry's costs by green taxes and charges, and jobs are exported, particularly in energy-intensive industries, to other parts of the world that are not so concerned about environmental damage, even if you accept the precepts of man-made global warming. Why our steel industry has to put up with this, I have no idea. As I've pointed out many times in the past, what happens in Wales is going to make absolutely no difference whatsoever to carbon dioxide levels around the planet, and yet as the poorest part of the United Kingdom and one of the poorest parts of western Europe, we are a part of the world that can least afford these kinds of indulgences. So, I do—[Interruption.] Well, the facts speak for themselves; I haven't time to go into them now, but I will be making a speech of that kind again before too long, I am sure.

But what the Government has done and plans to do on transport infrastructure, particularly rail infrastructure, I think is a very good thing, and I certainly accept what Mark Reckless said about solving the traffic problems around Newport. If Wales is to make itself a more attractive venue for investment then the ease of getting in and out of Wales is absolutely key. But the overall atmosphere, I think, of Wales has to become more positive and cheerful and enterprise-friendly. There are many statistics that I could quote about Wales's relative inability in recent years to attract entrepreneurs here and businesses and enterprises that are in the industries of the future, which Mike Hedges was talking about earlier on. There are more programmers and coders in the UK than there are in Silicon Valley and San Francisco and so on. So, these, I wholly accept, are the industries of the future. So, I'm afraid the answer is not going to be more and more Government spending but actually getting Governments off the backs of the people and off the backs of businesses. That's the way forward for Wales.

Photo of Siân Gwenllian Siân Gwenllian Plaid Cymru 5:22, 6 February 2019

(Translated)

I hope that each and every one of us can support amendment 5, tabled in the name of Rhun ap Iorwerth. In 2017, Adam Price and I published this discussion paper, 'The Future of the West: Collaboration for the Benefit of the Economy and the Welsh Language'. It outlined the desire to see the councils of the west—Anglesey, Gwynedd, Ceredigion and Carmarthenshire—working together on strategic issues of economic development.

The economic and linguistic situation in the west of Wales has reached crisis point: the outward migration of young people, per capita income levels being among the lowest in Europe, a lack of investment, the Welsh language as a community language withering away, and Brexit threatening the future of agriculture and rural communities and universities of the area too. The challenges are great, and we need urgent solutions to them.

Plaid Cymru managed to persuade the Welsh Government to allocate £2 million for the initial work on this, and the Arfor region in west Wales has now been established. The concept is taking root. It can go from strength to strength from this point onwards, and Plaid Cymru's vision is to create a strong economic region in the west of Wales that will carry out effective economic interventions in order to tackle some of the major challenges facing this rural Welsh area. The area will include growth areas such as the Menai area, which includes part of my own constituency of Arfon.

The Conservatives, and it would appear this Labour Government too, do give a great deal of attention to the city regions. That is not going to strengthen most of the vulnerable economic regions of Wales. It is a flawed economic development strategy in my view, because it follows the ideology of the free market, and the end point of the creation of the city deals is drawing growth into already developing areas, depriving the rural and deprived areas of the economic support that they so need. For me, an economic development strategy should support the areas and populations that so need that support. But, at the moment, it’s a policy of 'those who are already well off get better off', where resources are concentrated on the areas that are already prosperous.

So, thank goodness for Arfor. The Arfor board has been established between the four counties, and a statement of intent was agreed, namely to work in partnership to establish a framework where economic development and language planning will be co-ordinated. A strategic plan will be prepared that will set out a long-term vision and a modus operandi in order to achieve economic and linguistic prosperity in the west of Wales. Additionally, a range of projects will be implemented and evaluated in order to discover the most effective ways of creating economic prosperity on the ground, and I look forward very much to seeing that work develop.

This is at its very early stages. Arfor is an important counterpoint to the city regions and the growth areas, and it deserves to be recognised fully so that it can develop into a powerful western powerhouse for the future. 

Photo of Nick Ramsay Nick Ramsay Conservative 5:26, 6 February 2019

Well, Neil Hamilton is calling for us all to be more cheerful and we've got to that point of the evening when Mike Hedges is being urged to create a new political party. So, I think it's clearly time we all packed our bags and wound up this debate, which I will allow—[Interruption.]—which I will allow my colleague to do after the Minister has spoken.

Look, I think, as Mohammed Asghar said towards the start of this debate, 2019 marks 20 years of devolution, and we remember some of the great promises that were offered to us back at the dawn of that process. One of the key promises, of course, was that the Welsh Government would have control of its economic levers and would be able to boost the economy. Well, to be fair to that early Welsh Assembly, the powers were limited. We now stand at a crossroads with the devolution of tax powers and more tools in the toolbox—I remember that expression that we've heard so many times—and we've been through many referenda to enhance powers.

As Russ George said in opening this debate, we need to boost the economic fortune of Wales's poorest areas—that's what this debate is about. And there is no quick fix. There is no place for platitudes and pretending that any single party here has all the answers and by simply changing policies overnight then you would suddenly get to a magical never-never land that doesn't exist. The only way to resolve this situation is through supporting small and medium-sized enterprises and also developing our transport network, and, indeed, our networks, not just transport but also broadband, which I don't think has been mentioned today, and making sure that our digital infrastructure—sorry, Mike, you mentioned it; one of your manifesto policies, obviously, for the new party—developing our transport network and our broadband infrastructure in both urban and rural areas. Because, yes, there is a lack of parity between urban and rural areas of Wales, and, yes, the north and the south and the east and the west, but that cannot be solved by one quick fix.

New tax powers must be part of the solution, increasing the accountability of this place on the one hand, accessing new borrowing powers to invest in infrastructure—and, of course, developing a competitive and sustainable tax base that encourages wealth generation is key, because, without developing that wealth generation, you do not have the wealth to divide up; you do not have the wealth to tax and to spend on all-important public services. And I welcome the Finance Minister's renewed commitment to keeping income tax on a par with English levels, at least until the next Assembly election. As the First Minister said towards the end of his tenure as Finance Minister: if you raise the basic rate of income tax, you take away money from people who can least afford it in challenging times. And we know there currently aren't enough higher-rate taxpayers in Wales—a far lower proportion here than in England—for those to be taxed in any way like they would need to be to raise the sort of money that we would need to without really increasing economic growth. So, we need to grow the tax base.

The Cardiff city region has been mentioned, and, indeed, the Swansea region, and I really take Mike Hedges's point: the city regions are all well and good, but we've got to look at the companies within those city regions, and it's no good having lots of small and medium-sized enterprises of the type we all want to encourage if we then have a break between those companies going on to be really big players on the European and, indeed, the international stage.

So, there are all sorts of things that need to be looked at here, and as I say, I don't think that there is any single policy that will alleviate this. It falls to Ken Skates, the economy Minister, to be responding to this debate, but, actually, I think it's pretty much covered every portfolio and every ministerial department in some way or another—it's one of those debates. But, one thing is clear: we need the next 20 years of devolution to deliver on economic growth and growing prosperity in the way that the last 20 years, quite simply, didn't.

I think we do stand at a crossroads on devolution where the times when we can turn around and say, 'This place doesn't have the powers to achieve that', are soon going to be behind us, and it will fall to the people in this Chamber to make sure that we do deliver that sort of improvement in the Welsh economy that we all want to see. You don't have to give me a membership form for a new party quite yet, Mike Hedges, but I, for one, am very happy to work with yourself and any Member of this Chamber who wants to move Wales forward now and in the future.

Photo of Ann Jones Ann Jones Labour 5:31, 6 February 2019

Thank you. Can I call on the Minister for Economy and Transport, Ken Skates?

Photo of Ken Skates Ken Skates Labour

Diolch, Dirprwy Lywydd. It's a great privilege and honour to be able to respond to Members today in this debate. I'd like to thank Members for their contributions and I think Nick Ramsay is absolutely right: prosperity is dependent on more than just the levers in one department within Government. However, I am very pleased to be able to respond to this debate.

At the outset, I'd like to say that our new approach, which is set out in the economic action plan, will enable all parts of Wales to develop their strengths and to embrace their opportunities so that they not only make a bigger contribution to wealth and well-being nationally, but that they also benefit from it more. A more effective and collaborative approach to regional economic development will undoubtedly help to address this, and that's why we've introduced chief regional officers, and why we're establishing three regional units under their leadership. Russell George is absolutely right to insist that they have sufficient human and financial resource, and I'll say a little more about that shortly.

The units will support work to consolidate regional governance structures, effective alignment of levers across Government departments and the development of co-produced regional plans. The chief regional officers and their teams I think are the glue that helps to bind together the regions around common cause and unity of purpose, bringing leadership and coherence to the good work that is already taking place at a regional level. This includes, of course, the role of city and growth deals in driving regional growth. City and growth deals are not a panacea, but they do have a critical role to play, provided that they are effectively co-ordinated alongside wider interventions, and I think it's vital that all of Wales feels included in this particular initiative, and that's why we're supportive of the ambitions of north Wales and mid Wales for their growth deals.

They shouldn't be seen simply as project-funding vehicles, though. They are critical tools in providing a framework that allows regions to drive a new way of collaborative working, setting priorities as a single voice and delivering key functions at a strategic level. Each region needs to identify its priorities and then to take responsibility for driving sustainable economic growth across the region. Much has been said of the efforts in mid Wales and in north Wales, and I would urge all partners who are driving the deals to ensure that any deal demonstrates benefit for the whole of their region, and that they are transformational, aspirational and truly ambitious.

In December, we announced—[Interruption.] Yes, of course.

Photo of Rhun ap Iorwerth Rhun ap Iorwerth Plaid Cymru 5:34, 6 February 2019

Just briefly, there are projects, of course, that aren't involved in deals. I proposed one, suggested yesterday, on Anglesey—the reopening of the Gaerwen to Amlwch railway line—an important kind of transformative project. I was disappointed that the Government and your benches voted against my amendment yesterday, but I will give you one more chance to say that Government is eager to work with us on giving a new focus to taking that particular project forward, which would be transformative, as I say, for that region.

Photo of Ken Skates Ken Skates Labour

Well, can I thank Rhun ap Iorwerth for his question? I'd dearly love to see many of our railway lines reopen, including the Amlwch line. What's important is that we pursue the UK Government money that's required in order to open lines in a way that sees local authorities working together with Welsh Government, and in doing so, that we develop strategic approaches in order to have the best chance of drawing down what is highly competitive funding. 

Dirprwy Lywydd, rarely will you hear me agree so fundamentally with Russell George in terms of the principles that should be underpinning our economic strategy, but he did articulate, essentially, what stands at the heart of the economic action plan, which is that we must ensure that we grow wealth and well-being in the aggregate, whilst also reducing inequalities in both. But, as I said yesterday, in order to iron out inequality across the UK economy, we need new funding models that are based on more than just economic outcomes, because those models will always ensure that infrastructure spend and research and innovation spend are concentrated in areas that are already wealthy, in the south-east of England, and, of course, in the golden triangle. Instead, we need a new funding model that supports inclusive, fair growth. That means fairer funding not just for Wales, but also for many of the English regions.

But, of course, we shouldn't just pontificate about this, we should show leadership ourselves. I'm pleased to be able to inform Members that regional indicative budgets are being established within the economy and transport portfolio. They will be published this spring, and I regard this as an important part of our approach to securing a greater regional dimension to our work, and, of course, a fair share of Welsh Government investment across the regions. This development does not require legislation, as is being proposed by Plaid Cymru, but it does require, of course, ministerial determination to deliver a fair deal for the regions of Wales at a time when we are calling on the UK Government to ensure that there is a fair deal for Wales.

Photo of Rhun ap Iorwerth Rhun ap Iorwerth Plaid Cymru

I made the point earlier that the idea behind our regional renewal Bill is to give the kind of focus to Government that the welfare of future generations Bill gives you. You could do all of that without the legislation, but the legislation helps.

Photo of Ken Skates Ken Skates Labour 5:37, 6 February 2019

Legislation can help, but it is not necessary, as has been demonstrated by my decision to establish the regional indicative budgets.

Deputy Presiding Officer, I will give Rhun ap Iorwerth and Siân Gwenllian an opportunity to respond to me, because I think there was a proposal to redistribute wealth within Wales, solely within Wales. There was talk about how there are no differences between the north and the south, but significant differences between the east and the west, and so we need to disseminate the wealth of the east to the west. I would argue that, actually—. I am going to sound more of a nationalist than our friends and colleagues. I would argue that, actually, if there's going to be any redistribution, any dissemination of wealth, it has to be from the south-east of England to Wales, because if we are to grow wealth in the aggregate, then we have to have the dissemination of wealth away from the part of the UK that is currently by far the wealthiest.

Ultimately, I wish to provide—[Interruption.] Of course.

Photo of Siân Gwenllian Siân Gwenllian Plaid Cymru 5:38, 6 February 2019

By doing that, though, the danger is that we're going to reciprocate exactly what's happening in the rest of the UK—that is, everything going to the south-east—in Wales, with everything being concentrated in one corner of Wales. That's the major problem that's facing us.

Photo of Ken Skates Ken Skates Labour

Dirprwy Lywydd, that's precisely why I said that we're establishing the regional units and regional indicative budgets, to ensure that we have a different funding model to that which operates within the UK Government, which in turn ensures that we are able to more fairly invest in infrastructure across Wales. Let's face it: it's infrastructure and the provision of skills that drive economic growth. They're the two big factors. So, if you have a greater degree of fair funding across a country, you will have a greater degree of economic growth that is inclusive across a country. I think we are showing the world the way to go, and that's why we have invited the Organisation for Economic Co-operation and Development to assess the success of the economic action plan against our ambitions to drive inclusive growth.

It's worth saying that in a post-Brexit environment, of course, we expect Wales not to lose out to a penny in terms of the investment that we would expect, and that we wish to see decisions on economic development and investment made here in Wales. In 2017, we, of course, published the paper on regional investment in Wales after Brexit, and that paper calls for regional investment decisions to continue to be made in Wales, by Welsh Government, by local authorities, and through emerging regional structures.

Deputy Presiding Officer, I'm conscious of time. Can I just say that I think, generally, across the Chamber, Members have identified all of the key factors that drive economic growth? All of those key factors are encapsulated within the economic action plan, and I would invite those Members who have not yet read that particular strategy to do so with some urgency.

Photo of Ann Jones Ann Jones Labour 5:40, 6 February 2019

Can I call on Mark Isherwood to reply to the debate?

Photo of Mark Isherwood Mark Isherwood Conservative

Diolch. Russell George began by noting that Welsh Government policies over 20 years have failed to address economic inequalities between regions in Wales, welcoming the Cardiff city region deal, Swansea bay city region deal, north Wales growth deal, and possibilities for a mid Wales growth deal, and called on the Welsh Government to promote a regional development policy post Brexit that not only incorporates the mid Wales proposal, but also supports deprived communities across Wales wherever they may be. He noted the gross per capita gap between particularly north-west Wales and south-east Wales. He noted that GVA per capita on Anglesey was almost half that in Cardiff, and Anglesey, sadly, still remains the poorest area within Wales per head in terms of value of goods and services produced. He talked about very poor growth rates in the least well-off parts of Wales by comparison with growth in some of the least well-off parts of England, and he talked about exposing the need for an effective economic strategy to address this.

Rhun ap Iorwerth began with a strange defence of Welsh Government performance, despite the comments made earlier about Anglesey having a per capita wealth of only half that in Cardiff. He talked about inequality. He talked about the need to bring prosperity to all parts of the Welsh nation.

Mohammad Asghar noted that the Welsh economy had underperformed for the last 20 years, that it remained the poorest economy in the UK and failed to address the regional inequality within Wales, and that Welsh Government economic plans had vibrant titles, which had been belied by a failure to deliver. He talked about lower income levels and higher poverty levels in Wales than the rest of the UK.

Mike Hedges said the gap in the Welsh economy had not been filled, that there was underperformance in sectors paying higher wages, and that if we keep on doing the same thing, we will keep on getting the same results. Well, instead of forming your own party, I think you could come and join us, because that's exactly what we think too. [Laughter.] Mike. 

Photo of Mike Hedges Mike Hedges Labour 5:42, 6 February 2019

I'm hoping my party will sign up for endogenous growth, because I think that's the only way we're going to take our economy forward. Do you agree? 

Photo of Mark Isherwood Mark Isherwood Conservative

Well, it takes me back to economic lectures on endogenous growth curves, but I won't go into that at the moment.

Mark Reckless talked about the difference in definition between GVA—the value of goods and services produces per head of population—and wages and prosperity, because GVA captures where value in goods and services is generated and not necessarily where people commute from. So, we have to look at the picture in the whole.

Neil Hamilton talked of the need to raise income levels generally. He said that Wales doesn't have all the economic levers available to Ireland, for example, but, of course, Wales is still lagging behind the other nations and regions where the same UK policies apply. And then he emitted his thoughts on emissions, and we have to look forward to more of that, I gather, in the future. He concluded by saying we need to get Governments off the backs of business and the people.

Siân Gwenllian talked about economic collaboration between the councils of the west, but, of course, councils in north-west Wales are already prudently signed up to the north Wales growth deal and, clearly, co-operation and collaboration across all regions is good as long as that's not compromised, and she rightly highlighted the need for economic and linguistic prosperity in west Wales.

Nick Ramsay talked about the promises made at the dawn of devolution with Welsh Government in charge of economic levers, but we need to spend the next 20 years delivering what we failed to do during the first 20. We need to boost the economic fortunes of Wales's poorest areas, but there's no quick fix, especially after the last two decades. The need to support small and medium enterprises, transport, and digital networks in urban and rural areas, and he talked about the need to use new tax and borrowing powers to generate the wealth that can then be taxed and spent on public services.

Ken Skates referred to how his economic action plan will reach other parts that Labour-led Welsh Government has failed to reach during its first two decades in charge. He talked about good work at the regional level, including city and growth deals, about his regional indicative budgets being developed. He agreed with Russell George that we need to grow wealth and reduce inequalities and he said we need to move wealth from the south-east of England to Wales. But I understood that it was the taxes paid in the south-east of England that are currently plugging the gap between the amount that Wales was paying in and the amount it was currently receiving. 

Tragically, Wales remains the least productive of the 12 UK nations and regions. Even more shockingly, for the value of goods and services produced per head in Wales, growth has been slower than Scotland, Northern Ireland and England once again. The only particular positive that I can see was that the highest growth in Wales had been in Flintshire and Wrexham, but that was still below pre-devolution levels. Frankly, it's a betrayal that regional inequality in Wales is as it is, with successive Labour Governments failing to close the gap between the richest and poorest parts of the country. 

I'll conclude by quoting WalesOnline's article yesterday when they interviewed people in Ebbw Vale. They reported responses from residents, business owners, councillors, business forum chair and others being all the same: that they'd had a lovely statue, a lovely glass canopy to replace the old one, a mechanical lift that connects one part of town to the other, a leisure centre had been replaced, a college had been replaced, but despite millions spent on regional regeneration projects, it hadn't done what they needed—bringing jobs and bringing businesses in.

Photo of Ann Jones Ann Jones Labour 5:46, 6 February 2019

Thank you. The proposal is to agree the motion without amendment. Does any Member object? [Objection.] Thank you. We defer voting on this item, then, until voting time. 

(Translated)

Voting deferred until voting time.

Photo of Ann Jones Ann Jones Labour 5:47, 6 February 2019

Unless three Members wish for the bell to be rung, I am going to proceed directly to voting time. Okay, fine.