Support for the Welsh Economy and Funding for the Devolved Institutions

Published date : 05 July, 2022
It is a pleasure to speak in this debate on Welsh estimates, and to congratulate the right hon. Member for Preseli Pembrokeshire (Stephen Crabb) on a fine speech. I thought my good friend the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) was slightly unkind to tease him by saying that Yes Cymru would put it on YouTube, but I am sure that the Secretary of State will provide more than enough ammunition on that front in his summing up—I hope he does not disappoint.

I have remarked before in debates about Wales on the ambitious policy programme of the Welsh Government, and the package of measures that they are taking forward to reinforce the foundations of society in Wales and create a modern, prosperous, socially just, confident and inclusive modern European nation. I noted the plea from the hon. Member for Aberavon (Stephen Kinnock) for everyone to plight their troth to the Labour party. We in Scotland are quite happy with where we are with our SNP-Green coalition in Holyrood, and with our contingent down here. In Cardiff, there is obviously a coalition of ideas, if not in Government. It seems to be only in Westminster, where there is a single-party Government with a thumping majority, that dysfunction reigns. If there is a coalition of chaos anywhere in these islands, it seems to be in the Conservative and Unionist party, as it tries to stagger forward coherently from one week to the next.

While I was preparing my speech, I saw the Welsh Government’s annual report for 2022; it came hot off the presses today, in fact. I hope to have a chance to browse it later. It is due to be debated in the Senedd later this month. It reports on the Government’s 10 objectives. Some of the themes that leapt out of it will not be surprising or indeed unfamiliar from the Scottish perspective, particularly the need to tackle post-pandemic issues in the health service, which are common; protecting, rebuilding and developing services, particularly for vulnerable people; the urgent need to build an economy based on the principles of fair work and sustainability; embedding a response to the climate emergency in all that we do; and leading the broader civic conversation about how we wish to be governed, what we want our institutions of government to look like and what our place in the world should be. None of those things, particularly the last, should be under-looked as key components of building back better, especially when it comes to ensuring that we take the right actions and, just as importantly, have the right tools to tackle the cost of living crisis.

At the beginning of 2022, Wales had the highest poverty rate of the four nations, with almost one in four people living in a measure of poverty and 14% of Welsh households—nearly 200,000—living in fuel poverty in October 2021, which was prior to the price cap increase. I pay tribute to the hon. Member for Ceredigion (Ben Lake) for all his work on this issue and on fuel oil. I tried my luck on the subject at Welsh questions, just minutes before the Chancellor made his spring statement; I asked the Secretary of State—very much in the hope of getting a sneak preview of what might be coming in a few minutes—what discussions he had had with the Chancellor about the Government’s plans in this area to tackle the cost of living crisis. I was told to wait and see. So I waited and I saw. The Secretary of State said that, as a heating oil customer himself, he also suffered from this problem. Indeed, I probably know more about the Secretary of State’s domestic heating arrangements than I do about how the Chancellor plans to tackle the issue for homeowners who are in that group.

However, it is not just homeowners who are under the cosh. Fuel poverty is a key driver of in-work poverty. Nearly 400,000 households in Wales are on universal credit or legacy benefits, and nearly 40% of those in receipt of those benefits are in employment. That problem is clearly not confined to Wales, but it is a depressing statistic, and one that is pretty damning of the UK Government’s policies over many years. In the St David’s day debate this year, I remarked that the UK was one of the most geographically divided countries in the OECD when it comes to economic performance. Beyond the political knockabout, there are some deep-rooted structural reasons for that. There is a history of de-industrialisation, and a real imbalance in research and development funding; London and the south-east hoover up 54% of the total R&D spend in the UK, whereas the equivalent figure in Wales is only 4%.

For a country where prosperity has traditionally been based on what it can manufacture and export, it has been a significant blow to Wales to be taken out of the single market. With Welsh exports to the EU accounting for some 60% of its total exports, compared with just over 49% for the UK, it is a particular blow that neither major UK party represented in this place now supports being in that market.

The Office for Budget Responsibility has calculated that under the trade and co-operation agreement, the trading arrangements between the UK and the EU are set to reduce UK productivity by 4% in the long run relative to where we would have been had Brexit not happened. With those headwinds, it is absolutely imperative that there is some kind of silver bullet—some dynamic initiatives—that might help us to overcome those disadvantages with which we have been saddled.


The hon. Member makes an excellent point. I remember well the benefits that were brought to the highlands and islands, part of which he represents, through objective 1 funding. The fact that the money came direct, bypassing London, gave us an assurance that the money would actually be spent in those areas. I am not certain that we could have had the same confidence in the UK Government in office at the time. The hon. Member and I differ on certain things in politics, but I think we might be able to make common cause on that.

The hon. Member leads me neatly on to levelling up. The Welsh Economy Minister, Vaughan Gething, has stated that Wales is set to lose some £750 million over three years, compared with the situation that would have pertained had the UK remained in the EU. I heard the plea and the earnest hopes from the hon. Member for Aberconwy (Robin Millar) that, somehow, Wales might be able to do better with less when it comes to that funding shortfall. I certainly applaud the ambition, but surely there can now be no doubt that there is a deficit of funding, relative to what it would have been, and that will be problematic when it comes to delivering projects. I see that even in my area of Aberdeenshire in north-east Scotland.

We could look at freeports. There are opportunities there for sure, but Stena notes that in the ports of Holyhead, Fishguard and Pembroke, traffic is down 30% on the pre-pandemic period. It will take significant activity around our freeports to compensate for that loss of economic activity in the ports, and resulting from that reduced traffic.

I could go on to talk about fair funding and how HS2 has conveniently been placed outside the brackets for Barnettisation, but I come back to the points that the right hon. Member for Preseli Pembrokeshire was making about offshore wind. I welcome his comments about the benefit that ScotWind promises to bring to Scotland.

As the right hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts) said, Crown Estate devolution can play a major role in making sure that all the pieces that the right hon. Member for Preseli Pembrokeshire talked about are brought together strategically, so that we get all the supply chain spin-offs. It is, I would say, a fairly conservative argument that the Government should bring policy and resources into alignment, so that we get the best possible outcome and transparency—not just transparency of Government, but transparency in how we spend public cash. I cleanse the palate by saying that, to me, true devolution is empowering Government to act in that way in Wales and Scotland. That is preferable to bypassing devolution, as the United Kingdom Internal Market Act 2020 did to get around the fact that the Conservative party does not seem able to win elections in Scotland or Wales. It instead seeks to allocate resources without going to the trouble of winning elections in those areas.

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