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Wales: Economy

Volume 753: debated on Monday 7 April 2014

Question for Short Debate

Asked by

To ask Her Majesty’s Government what is their assessment of the prospects for economic recovery in Wales.

My Lords, historically Wales has languished economically behind the rest of the UK for generations. Following the boom years of the coal era, harsh reality struck in the 1970s and 1980s when communities across the country were devastated by the loss of big industry—coal and steel, in particular. Wales has taken a long time to readjust to the new world, but at last we are seeing really positive signs of growth. That growth is currently outstripping the rest of the UK thanks in large part to a completely different approach in Wales using direct intervention—good, old-fashioned Keynesian economics by the Welsh Government. We moved to plan B rather than sticking to Osborne’s plan A for as long as he did and we are reaping the rewards quicker.

Rather than declaring a war on Wales the Conservatives should be looking to emulate the success of the Welsh Government on the economy. Unemployment rates in Wales have been tumbling, with the unemployment rate in Wales now lower than in England, Scotland and Northern Ireland. Can you believe it?

It is pretty clear that there have been attacks and noises coming from Ministers, such as Grant Shapps, for example, who visited Wales and said that the Government are using Wales as a battering ram ready for the next general election.

Plan A by the UK coalition Government in large part has cut and cut public services white crossing their fingers in the hope that the private sector will take up the slack. The Welsh Government have deliberately taken a different approach and intervened in stimulating economic growth through a number of measures, standing by the struggling private sector in maintaining jobs through the tough times of the recession, stimulating economic activity through maintaining Welsh Government investment in infrastructure, and developing an aggressive approach to stimulating inward investment and boosting an export drive.

These measures are now paying off, which is, I suggest, the main reason why Wales is coming out of the recession quicker than other parts of the UK. The unemployment rate in Wales is now 6.7%, lower than the UK average of 7.2%, a 20% reduction in the past year. Despite the fact that there has been a 31% cut in real terms to the Welsh capital budget between 2009 and 2016, the Welsh Government have reserved £1.3 billion of investment in capital funding to improve Welsh infrastructure—more money for transport, housing and flood defences.

Wales will be one of the first countries in the world to ensure superfast broadband for 96% of properties. In England the figure is 90%. Upon completion, Superfast Cymru will make Wales the most connected country in Western Europe. Inward investment in Wales has increased by 200% and produced 7,000 new jobs. Who knows, though, what impact the ambivalent attitude of the Tory Government towards EU membership will have on inward investment in future?

One of the first things that the coalition Government did on coming to power was to scrap the Future Jobs Fund. Wales reacted by creating its own Jobs Growth Wales plan, which has created 11,000 job opportunities for unemployed 16-24 year-olds in Wales. However, while I think it was right for the Welsh Government to concentrate on unemployment because it is the key to better health, better education and better outcomes overall, we are still struggling in terms of wealth. Wales is still poorer relative to the UK as a whole, but the Welsh economy is growing at 1.6%, one of the fastest rates in the UK. The problem is that we are starting from a low base.

We need to continue our focus on driving up GDP levels, a much tougher task. This is about what kind of jobs we have in Wales and encouraging the export of Welsh goods. The Damocles sword hanging over the Murco oil refinery could reduce our export figures significantly. The oil refineries in Milford Haven are critical to the Welsh economy. The Valero refinery alone is responsible for 25% of all Welsh exports. So the closure of any refinery would not just have a devastating impact on employment in the area, but would have a disproportionate impact on Welsh GDP figures. I know that the Welsh Government are doing everything in their power to try to save the refinery. What is the Secretary of State doing to help to find a buyer for the plant? The Welsh Government have developed a programme of support that identifies and helps to build companies’ capacity to export. This is already paying dividends, with an increase of 11% in exports compared with a rise of just 0.4% for the rest of the UK.

Central to improving GDP is the need to build the skills of the Welsh people and to upskill the workforce, ensuring a good stream of graduates. Despite the fact that some Conservative MPs have suggested that applications to universities from people living in Wales are down, the truth is that when the Tory-led Government trebled tuition fees there were 42,000 fewer applications from English students while in Wales there was a fall of just 100. That was because the Welsh Government stood by students from Wales, capping the fees at £3,000. Welsh apprenticeships have seen completion rates rise from 54% in 2006 to 85% in 2012, beating England’s 73% completion rates. Some 90% of these have gone on to find sustained employment or engage in further learning.

There needs to be a particular focus on developing skills in the engineering sector, which will be key to the economic growth prospects of Wales in future. The Royal Academy of Engineering has suggested that there are 95,000 Welsh people who declare themselves as being engineers; 30% of those are over 50 years old and yet only 1,500 applicants were accepted on to engineering courses in 2012-13.

Given the profile of the engineering workforce in Wales, there are not enough young people coming through the system to replace the ageing workforce. That will ultimately result in skills shortages and we will have to recruit from outside Wales. A deliberate focus on that and on driving up the pool of those able to enter the field through better results in maths in school is imperative. Again, the Welsh Government’s focus on numeracy in schools should help with that.

The gap between Wales and London has now become a gulf. Although that has certain advantages in terms of the costs of living in house prices and childcare costs in Wales compared to London and the south-east, the coalition Government need to demonstrate to the country that they are in touch with the pressures that are still being felt outside the M25. We have not seen much evidence of that. The measures that they have taken to stimulate the economy have exacerbated the situation rather than helped it, as evidenced by research by the Centre for Cities, which recently suggested that for every public sector job created—yes, created—in London, two have been lost in other cities. The Help to Buy scheme has undoubtedly helped to cause a housing bubble in London, causing huge resentment outside the capital, where people watch as those who have already bought watch their wealth grow with no effort. That is not help for hard-working people; it is the luck of the draw on where and when you bought a property. It is also unsustainable in the long term.

In December, the UK Government announced their £375 billion infrastructure spending plan for the next two decades. If Wales were to get its 5% share, we should see £18.7 billion of investment coming to Wales. We know that the Wales Office boasts of £2.5 billion of investment that will come to Wales, but I ask the noble Baroness where and when we will see the rest of it and what we can do to speed up spending of the investment already promised. Will we see any of the infrastructure promised by the UK Government delivered during this Parliament?

Wales is absolutely on the right track in terms of the prospects for economic recovery, but more needs to be done to ensure that the two arms of government at UK and Welsh level co-ordinate their efforts to reduce the gap between Wales and London. That means more economic intervention from the UK Government and a more proactive regional approach further to stimulate the Welsh economy and to cool down the overheating that is occurring in London. I ask the Minister to ask her Government to stop the war on Wales and engage in more constructive politics with the Welsh Government. England could learn from Wales on the economy; and, yes, on aspects of education and health, Wales could and should learn from England.

First, I congratulate the noble Baroness, Lady Morgan of Ely, on securing this important debate. I agreed with some of what she said, although I must say that she often exemplifies a creationist approach to politics, as if nothing had ever happened before the Conservative victory and the alliance with the Liberal Democrats in 2010. There were, of course, deep historic problems with the Welsh economy well before 2010. We can understand the challenge only if we consider the historic position of Wales. Wales has had problems of poverty, particularly in west Wales and the valleys well before 2010. Nor is it just about employment, important though that is.

Let me say something about GVA, because that has been an historic problem in west Wales and the valleys, in particular. It has been falling for some time. It was falling well before 1997 and continued to fall until the present. That remains a massive problem with the loss of heavy industry. We have seen the growth of the service sector, which is significant, with employers such as Admiral Insurance, which is in the FTSE 100—our only FTSE 100 company. That is concentrated in south-east Wales. There is Moneysupermarket in north-east Wales, and there are iconic brands, such as Airbus. Much is going on in Wales that is very good.

It is true that the position on employment in Wales is healthy. Unemployment is falling fast and we have a good story to tell. Of course, the noble Baroness did not say that that is also true of England, Scotland and Northern Ireland: it is falling there too, despite the predictions of the Labour leader that we would have 1 million extra unemployed through the recession. We are no longer in a recession; it is not that Wales is coming out of the recession more quickly than elsewhere; we are all out of recession. That is an important point to make. It is the position in the whole of the United Kingdom that unemployment is falling and continues to fall. Nor are the economic levers just with Wales; they are also with Westminster. One thing that was stressed in Silk II—I declare an interest as a member of the Silk commission—was the importance of partnership between Westminster and Wales. I think that we would all subscribe to that, because there are things that have to be done together.

I think that it is fair to say that this coalition Government have pushed things forward where they were not pushed forward by the previous Government. For example, rail electrification, announced first to Cardiff and then to Swansea, had not been tackled by previous Governments—and certainly not by the previous Labour Government under either Prime Minister Blair or Prime Minister Brown at a time when we had more resources. That project is very good news. I know from first hand that the Prime Minister took a great personal interest in it, not least because he travelled to Swansea and recognised the difficulties of that journey and how important it was for Wales to improve on it.

Let us look at the recent Budget. There are many things that successive Budgets have done to help Wales. Successive Budgets from the coalition Government have seen 155,000 people in Wales taken out of tax altogether. In the most recent Budget, which I think has been widely welcomed, the cost of energy has come down, which is good news for Wales.

The noble Baroness mentioned, and I agree with her, the problems at Murco—I declare my interest as chair of the Haven enterprise zone, which includes Murco as our second most significant employer after Valero, also mentioned by the noble Baroness. That situation exemplifies the need for a partnership between Westminster and Wales to save those vital jobs. They are vital for Pembrokeshire, but the whole of that plant is vital for the United Kingdom, as the noble Baroness rightly said. We have lost Coryton. Given the problems of energy security, which have been exemplified and thrown into high relief by the situation in Ukraine, we need concerted action from both Governments to save those jobs. I have contacted the Department of Energy and Climate Change, which would perhaps be more central to this matter even than the Wales Office, to see what it is doing. I look forward to what the Minister has to say in that regard.

So, much that has been happening in Wales is good. There are historic problems and there is some good news that has been brought forward by this Government. I also welcome the news on Wylfa B and look forward to hearing what the noble Lord, Lord Wigley, has to say on that, because I think that he would take a personal interest in it, being from north Wales. I think that all parties, notwithstanding perhaps some difficulties on their policy stance on nuclear energy, have got behind that project and said how important it is. That, too, is something for which the Government deserve credit.

It has not been a question of waging war on Wales; I do not recognise that. That is certainly not the way in which the Prime Minister and the Chancellor have approached Welsh issues. From the referendum held in 2011, which I think was successful from all our points of view, to the commitment to look at Barnett when circumstances make that easier to tackle and a general approach to devolution and other issues in Wales, this Government have a lot to be proud of. Yes, there are historic issues that need addressing, but that is best done in a spirit of partnership. We would do well to recommend that approach to others in another place and at the other end of the M4—a phrase I hate, but it seems to exemplify the correct wording in this regard.

My Lords, I congratulate my noble friend Lady Morgan of Ely on securing this debate. Since the advent of devolution in 1999, Wales has seen many changes. One big change was the election of so many women—it was the first time in the history of Wales that such a number had been elected—with women Cabinet members holding important portfolios and providing good role models for the women of Wales.

How does this have an effect on the economy of Wales, with women being generally lower paid than men and more likely to be working part time, and with so few women at the top table? Women in all walks of life in Wales are undervalued. The recent report from the Equality and Human Rights Commission in Wales, Who runs Wales? A Lost Decade—No Change shows that Wales remains a country where those taking the major decisions that impact on everyone in Wales are overwhelmingly men. What is needed is better representative decision-making in all walks of life, at both the Wales and the UK level. Organisations, especially business and industry, are not using all the talents of Wales. There are so many women who could, if they were allowed, play a big role in driving the economy of Wales.

I was therefore pleased to see that the Welsh Assembly has recently established a cross-party group which will consider new research on women and the economy. It will be looking at several things, such as gender segregation, career progression, the under-utilisation of women’s skills in the Welsh economy, the under-representation of women in business, and modern working practices. That is really important if the aim is to use all the talents that we have in Wales. Women can, and want to, play their full part in the economic life of Wales. The findings of the group will, we hope, find a way forward for women and for Wales. Are any similar initiatives being carried out by the UK Government?

I will now consider some of the measures that the Welsh Government are carrying out to improve the economy of Wales, despite the fact that the cuts made by the UK Government have put the brakes on economic growth in Wales. Those unprecedented cuts mean that, by 2015-16, the Welsh budget will be nearly £1.7 billion lower in real terms than it was in 2010-11. To combat that, the Welsh Government have made the Welsh economy their top priority. As the First Minister, Carwyn Jones, said at the Welsh Labour Party Conference in Llandudno recently:

“There is now unquestionable evidence to show that as a direct result of Welsh Labour policies and intervention and our drive to sell Wales to the world—the Welsh recovery is well underway and in Wales, we are now well placed to take full advantage of any economic upturn … Wales is good place to do business … That is why Wales beat competition from England and Scotland to host the first Pinewood Studio outside London—an investment that will help bring 2,000 new jobs to Wales—recognition that we are now world leaders in creative industries”.

The new 180,000 square-foot studio facility in Cardiff is set to generate an estimated £90 million spent on Welsh business.

Another initiative that my noble friend mentioned is Superfast Cymru; she gave all the figures on that. It should reach completion by spring 2016. That would be a further boost to efforts to attract inward investment.

Unemployment is now lower in Wales than in the UK, and that is to be welcomed. Youth unemployment is also below the UK average, with a 22.5% reduction in the number of 16 to 17 year-olds without work in Wales over the past year, compared with a drop of just 1.2% in the rest of the UK—figures that clearly evidence that the Welsh Government’s policies are working for Wales and that they are stronger than in the rest of the United Kingdom. The Welsh Government have a good record of using all the economic levers at their disposal to encourage economic growth and support opportunities for inward investment and job creation in the Welsh economy

Wales is a small country with big ideas. The Welsh Government are working hard with business and industry to improve the lives of Welsh people. It would be good if the United Kingdom Government could stop criticising Wales and perhaps work in a more constructive way than they have been recently. Working together in partnership would be to the benefit of Wales and the whole of the UK. Perhaps we would then see an even better improvement in the economy of Wales.

My Lords, I, too, congratulate the noble Baroness, Lady Morgan, on obtaining this debate. Perhaps it is a good thing that it is limited to the Welsh economy, because it would be dangerous for her to refer, for example, to the National Health Service in Wales. The noble Baroness, Lady Gale, has just referred to the Welsh Labour Party conference in Llandudno. In his speech to that conference the First Minister, Mr Carwyn Jones, said that there were “difficult truths” about the NHS in Wales, and that examples of poor care in Welsh hospitals were unacceptable. He conceded that there was complacency at the top of local health boards, and said that Labour Ministers must “hold up” their,

“hands and say, yes we could have done better”.

We sometimes seem to be living in a different country when I hear the Welsh Government praised. The debate might also have been about the state of Welsh education, on which topic in the same speech Mr Jones had no answers but said that the schools system had “coasted” for too long. We once thought we led Britain in educational attainment, but the reality today is that we have fallen too far behind.

What was the First Minister’s answer to these criticisms? To declare that any criticism of his Government was the work of a Tory elite waging war on Wales. Labour, he said, was on the front line of the war on Wales. How pathetic is that, and how disappointing to hear that empty rhetoric, that newspaper headline, being used in this House? I have to say that it causes me great dismay.

The Welsh economy is in need of serious overhaul. The Welsh Labour and Labour-Plaid Administrations in Cardiff Bay have not placed enough emphasis on equipping Wales with the infrastructure and the skills necessary to compete globally. The economy has serious longstanding structural problems. There was a time when Wales attracted inward investment from foreign countries on the basis of low labour costs and low land costs, but that was not sustainable and it is no longer a unique selling point for Wales, nor should it be.

Transport infrastructure is of course crucial. In government, the Liberal Democrats pressed for the electrification of both the Great Western main line as far as Swansea and the totality of the valley lines. The decision has now been taken with the support of the Prime Minister, as my noble friend said. However, it now appears that the Welsh Labour Government are reneging on their financial undertakings to support that development.

What about the rest of Wales? Money is certainly promised for a new line for the M4 motorway across the Gwent levels and relief for the Newport tunnels, but in north Wales, plans to dual the railway line between the two vital business hubs of Chester and Wrexham and their surrounding industrial areas have been scrapped, while we can whistle for the electrification of the north Wales rail line, which carries freight to Ireland. That line is not part of the strategic freight network at all.

An excellent survey was published last weekend by the Welsh policy unit of the Federation of Small Businesses. It accepts that the British economy is recovering: 14% fewer of its Welsh members identify the economy as a barrier to growth than in its previous survey in 2011. However, the comparison in the survey between the views of their members in Wales and those of their members in the rest of the UK is revealing. Significantly, more businesses in Wales are concerned about the cost of finance, and indeed of obtaining finance at all, to expand and develop their enterprises and create more jobs. We would look for a creative solution to that from the Welsh Labour Government, but there is none. Businesses, it appears, are hit by higher business rates than in England, which, with falling rental values, leads to the dereliction of so many of our towns across Wales, as we know as Welsh people.

There is also great concern in the business community about the provision of fast and reliable broadband access. Our digital infrastructure, which should allow business to grow and compete in a global market, is not developed in Wales. We have languished at the bottom of the UK league tables for broadband speeds for years, and we have suffered with a lower proportion of households able to access broadband than any other part of the UK. I wait to hear what is the new initiative to which the noble Baroness, Lady Morgan, referred, to see what it produces or whether the Welsh Government will be holding their hands up again on that issue.

Many employers are concerned about the low skill levels in Wales, which affect productivity and are a source of competitive disadvantage. Basic skills attainment is lower in Wales than across the United Kingdom as a whole and 4% lower than in Scotland. Higher skills attainment is 3% lower than across the United Kingdom and 7% lower than Scotland. Wales is lagging behind. Where is the wonderful improvement to which the noble Baroness, Lady Morgan, referred?

Taking the point of the noble Baroness, Lady Gale, Labour is allowing Wales to fall behind with regard to childcare. It has been said that 1 million women are missing from the United Kingdom workforce, because it does not make sense financially to go back to work. That is even more so in the case of Wales. The Family and Childcare Trust’s annual childcare survey of 2014 showed that childcare costs in England are falling in real terms for the first time in 12 years, while in Wales the cost of nursery care for under-twos has increased by nearly 12%. So there is a massive agenda—

The noble Lord’s time is up. This is a time-limited debate to 60 minutes. We can have a brief intervention, but my noble friend needs to conclude his remarks.

Will the noble Lord comment on the fact that average costs of childcare in Wales are 10% lower than in England in every segment of care from under-twos to after-school clubs. So there is propaganda in his comments that is absolutely not true.

I am quoting the Family and Childcare Trust’s 2014 survey. In conclusion, there is a massive agenda for the Welsh Government to tackle, but the truth is that the Labour Administration is failing not just the Welsh people but the whole concept of devolution for which we fought.

My Lords, I thank the noble Baroness, Lady Morgan of Ely, for facilitating this debate. I share many of her concerns, particularly those regarding European Union uncertainty. However, I admit that I do not recognise other aspects of the Wales that she describes.

The economy of Wales is still, sadly, the poor relation of the UK. Back in the 1960s Wales had a GDP standing at 92% of the UK average. The GVA per head, today’s measure, has Wales down at 72.3% of the UK—the lowest of any nation or region in the UK. London has a GVA of more than £37,000 per year, Wales under £16,000 per year. This decline is a devastating indictment of the failure of public policy over that period.

Before any noble Lord rushes in to castigate our National Assembly and the Welsh Government, I will point out that much of this decline occurred before 1999 and most of the economic tools are in the hands of the UK Government. Under successive Governments this decline has sadly continued. Incidentally, many of us in Wales are indeed getting sick to the back teeth of some Tory politicians, and the right-wing London media in particular, constantly talking Wales down. The truth is that the polarisation between the haves and have-nots among the UK nations and regions has worsened over recent years. The most recent years for 2012 show the GVA of south-east England increasing by 2.5% and that of Wales, as has been mentioned, by only 1.6%. So the gap is still widening.

The main factor in the GDP or GVA disparity a generation ago was the low activity rates in Wales. Wales was then some 6% behind the UK average. This has changed over recent years and that is to be welcomed. Wales now has an employment rate of 71%, closing in on the UK’s level of 72.3%, yet, sadly, the youth unemployment figures, if one looks at the past three years, not just the past year, have risen five-fold in Wales. That is not acceptable.

In Wales, the inactivity rate has decreased to 23.7%—again, something to be welcomed—lower than the north-east, the north-west and the East Midlands of England and of Northern Ireland, yet still our GVA figures are low. The explanation is the poor quality of so many of the new jobs in Wales. Too many are at the rock bottom of wage levels and many are part-time, zero-hour contracts. This is as much a problem in rural Wales as it is in the old industrial valleys. The two worst blackspots in terms of average wages being below living wage levels of £7.65 an hour are Dwyfor Meirion in north-west Wales, with 39.9% of its workers below a living wage level, and the Rhondda at 39.7% below a living wage level.

My Lords, against that background we have perhaps all been overcritical of politicians here, so does the noble Lord welcome the fact that the Secretary of State is hosting a job summit in west Wales, talking to local government and local employers to see what the Wales Office can do to help?

I welcome initiatives taken by anyone to improve the situation in Wales. To that extent, it is not a party political question; it is a crisis facing all the people of Wales, particularly those on low incomes.

In total, 23% of Welsh workers are below the living wage level. Surely all working people in Wales should receive a living wage. We need to generate jobs paying top-level salaries and wages, not just at the bottom, and public policy must be geared to achieve that. To my mind, one of the worst decisions in recent years was that of Rhodri Morgan to abolish the Welsh Development Agency. I very much regret that that was supported by all parties in the National Assembly, including my own, and including by the noble Lord, Lord Bourne. Even if the WDA cannot be re-established, the Government of Wales should look seriously at the proposal put forward last month by Plaid Cymru, and endorsed by the Federation of Small Businesses, to establish a private sector-led body to identify investment opportunities for EU funds. There is a real danger of EU strategic funds being squandered by successive Governments on projects that do not produce self-regenerative economic growth.

There is a pressing need for much higher capital investment projects, and in that context I include Wylfa—very much so—the M4 link road and the electrification in the south of Wales but also through to Holyhead. Given the Assembly’s limited borrowing powers at present, it is to be welcomed that there is a development in the legislation coming before Parliament but it will be years before it is fully developed if we have to wait for yet another referendum for it to be approved. It is ridiculous that the limited tax-varying powers in the Government of Wales Bill should need a referendum. Why can the Government not take such decisions without running for a plebiscite cover on the most trivial change? If the Government justify themselves on the basis that the Silk recommendations called for that, why ignore the Silk proposal to break free of the lockstep constraint on those tax changes? We also need a public sector development bank in Wales, as they have in Germany, to support small businesses that are neglected by the high street banks.

To secure economic recovery, Wales needs a business-friendly Government with a commitment to the specific needs of Wales, who are not driven either by a statist bureaucratic dead hand or by the perennial prerequisite of protecting the City of London at every turn. The domination of the UK economy by London has gone on for too long. For the sake of Wales, and indeed many regions of England, we need new thinking on that matter, and we need it urgently.

My Lords, I, too, am grateful that this debate is being held. I came into the House of Lords 10 years ago and shared an office with the noble Lord, Lord Leitch. I did not see much of him for the first three years of the co-use of my office because he was fronting some research for the then Chancellor of the Exchequer into our skills base and the need for skills appropriate for the evolution of our economic needs over the next 10 years. The Leitch report was published shortly after that.

Skills have been mentioned in the debate, and I am sure that any improvement in the Welsh economy will depend on our having a skills base that is equal to the task. One contributing body to the improvement of skills that I prize almost above all others is the realm of higher and further education. Since the secession of Cardiff from the University of Wales and the break-up of the university as I knew it when I was a student there, the fragmentation of provision in the realm of higher education is to be regretted. I am fearful that Wales will replicate England in having a capital city in the south-eastern corner, hoovering unto itself much of the energy and resource that should be spread more widely across the Principality. As I look at what is left after we take Cardiff out of the equation, I see a little constellation of higher education institutions: in Denbigh, which I believe is struggling, and in Bangor, Aberystwyth and of course Swansea. However, my interest is particularly focused on south-west Wales. The need to take a look at Wales as a whole and to see the needs and interests of people across the Principality is essential in any view that one takes of economic development in Wales.

I commend something that is happening in the realm of further and higher education in west Wales. What was that region left with after the fragmentation of the University of Wales? There is St David’s College Lampeter, Trinity College Carmarthen and little else, although they happen to be the two most ancient higher education bodies in Wales. I myself once taught at the university at Lampeter and am now a fellow there. I have watched with great interest the successive efforts to put something together in the south-west corner of Wales that might respond to present-day needs. I see that it is now called Trinity St David—its name changes every other year, but I think I am up to date at the minute—with a campus in London for the study of business and related subjects. I visited it and talked to the people there with great interest. However, from August of last year, in addition to Trinity College Carmarthen, which was a teacher-training college, and the old liberal arts university at Lampeter, Swansea Metropolitan University joined, as did Coleg Sir Gâr. That brings together further education, a range of vocational qualifications and curricular studies, which makes the whole thing a very exciting body—in potential, at least. Across the two previously differentiated sectors of further and higher education, it can bring together and harness cross-fertilisation from engineering, beauticians and agriculture. It has a large farm, with lots of livestock and so on. The college no longer appoints a principal but appoints an entrepreneurial businessman. That is what is happening in higher education across the board, as survival becomes the name of the game.

As I look at south-west Wales, I think to myself, “That could be a sort of panic move to hold on to something at all costs and to cobble together something that might not work”, and that remains a possibility. However, at the same time it could be an innovative thing. Under the genius of Dr Medwin Hughes it could be a suggestion that provides a model of good practice that could be replicated elsewhere in the United Kingdom—bringing these sectors together, having them capable of looking to each other’s interests and developing each other’s skills. I therefore see in south-west Wales the possibility of providing skills in close communion with the local employment agencies, bodies and personnel, which I find very welcoming. I now know that we owe the electrification of the rails as far as Swansea to the Liberal Democrats. I urge them to use whatever authority they have, or imagine they have, in the Government to get the electrification taken further into west Wales, because that would help greatly. Infrastructure simply has to be provided now so that those welcome developments can flower and contribute materially to the well-being of the region in question.

I therefore just hold up the model of good practice, or at least I hope it will turn out—I really do—to be a model of good practice for south-west Wales. I urge Her Majesty’s Government to do all that they can, in the partnership that we heard spoken of in Silk 2, to contribute to the well-being of a distant part of the Principality, but which is as important to a view that we take of Wales as any other.

My Lords, I, too, thank the noble Baroness, Lady Morgan, for this debate. I wish to place on record my regret that at times it lapsed into political partisanship. In my opinion, the topic that we are debating is far too important to have snide political fights about. I declare three interests that have significant economic impact. One is the Welsh Millennium Centre, the second is the Royal Welsh College of Music and Drama and the third is Cardiff Airport.

In Wales, as we have heard, unemployment is lower than the UK average, at 6.7% versus the UK average of 7.2%. The private sector is growing, youth unemployment is falling and the Welsh economy as a whole is growing. However, there is still much ground to make up because, as has been mentioned today, what we are seeing is all coming off an unacceptably low base. Wales is still bottom of the UK GVA table and, given my passion and commitment to our country—and the same goes for all noble Lords in this Room today—I say that we have to climb that table, and fast. Let us not forget that we have done so in the past.

In many ways, the opportunity and challenge at the macro level is mirrored at Cardiff Airport, which will be the focus of my contribution today. In my current role there, I have witnessed over the past 12 months the enormous potential that exists at the airport as part of a strong and vibrant aerospace enterprise zone, and it will play a significant role in the economic recovery in Wales. We have seen growth in passenger numbers—a mere 9% in the first 12 months but, like the Welsh economy, that started from a low base.

The impact of the airport on the regional economy is multifaceted and complex. First, the airport is a major employer in its own right. Taking into account the world-class British Airways maintenance, repair and overhaul facility, the airport supports over 1,600 full-time equivalent posts. Incidentally, that decision by British Airways to locate in Cardiff was taken in the early 1990s by the late Lord Marshall of Knightsbridge, and British Airways has never regretted it. Yet this direct employment is just the first part of the story. The second is that with the indirect and induced employment across a range of sectors, when combined with the direct employment, evidence now suggests that the airport has a total operational impact of 2,600 jobs. This equates to an overall GVA impact in excess of £90 million.

There is a third part of the story. When we look beyond the perimeter of the airport fence, we can see that it has a wider, catalytic effect on the regional economy. While this is much harder to quantify, the evidence suggests that inbound tourism alone adds a further £50 million to the Welsh economy when its own indirect and induced factors are taken into account. All this from an airport that carries only 1.1 million passengers—fewer than 10 years ago, when it carried over 2 million.

The final part of the story is where there is potential for the airport, as it grows, to contribute significantly more: the enterprise zone. We have already seen examples across the UK, such as in Manchester and Newcastle, of airports now serving as mini-cities and economic hubs in their own right. This potential exists in Wales. We are fortunate to have the St Athan-Cardiff Airport Enterprise Zone, which is already attracting investment and new jobs. The zone has a vision for Wales to truly establish itself as a global leader in the aviation and aerospace sectors. This is no pipe dream. Many noble Lords know about BAE, GE engine maintenance, BA avionics and so on. We have a vital supply chain in the aerospace industry but I never hear anyone talk about it. It is a very strong part of Wales, and these are not low-paid jobs. In the north and the south, this industry is operating and growing effectively and there is much more to be done.

I will say two more things before I sit down. I am sick to death of the Barnett formula. I sat on your Lordships’ Select Committee under the previous Government. We have underfunded Wales for 30 years. The noble Lord, Lord Barnett, if he came into this Room, would say exactly the same, but it is always kicked off into the long grass. Now we wait for something else. Whichever Government are in power, we never get our fair share.

Finally, war has a few outcomes: victory or defeat. Do we want to have war? Would it not be better to have a truce and move towards real partnership—partnership between Cardiff and London?

My Lords, I thank the noble Baroness, Lady Morgan, for securing the debate today on this important issue. I have to remark on the change of rhetoric from the Opposition. A year ago, when unemployment was still higher in Wales and the statistics were not so good, we discussed this issue and the Labour Party told us that it was all the UK Government’s fault that Wales was lagging so badly behind. Now that unemployment in Wales has fallen and there are signs of recovery, which we would all welcome strongly, of course, the rhetoric from the Benches opposite is that this recovery is due entirely to the Welsh Government: the UK Government bear no responsibility for it at all.

The truth of the matter, as all noble Lords actually know, is that we all strongly welcome the fact that Wales is at last starting to catch up. Several noble Lords have referred to the fact that the problems with the Welsh economy have existed for many decades, and GVA—to which the noble Lord, Lord Wigley, referred—has been a persistent problem as it has declined over the years. These are not sudden problems and it is absolutely clear that there are levers in the hands of the Welsh Government, but the macroeconomic levers of course remain with the UK Government. It would be helpful if the noble Baroness took some of the advice of the noble Lord, Lord Rowe-Beddoe, and adopted a more open-minded approach to this.

The truth is that, since 2010, the UK economy has gone from rescue to recovery. Wales is now in a great position to take advantage of this. The economy is growing and, as the Chancellor outlined in the Budget, Wales is growing faster than forecast, as is the UK. We are now growing faster than Germany, faster than Japan and faster than the US. I remind the party opposite that it claimed that none of this growth would be possible if the coalition Government continued to take the difficult decisions to deal with the deficit. It predicted disaster, and disaster we have not seen.

I will refer to one or two issues relating to employment. It should be emphasised that since the end of the first quarter of 2010, employment in the private sector in Wales has increased by 114,000. Over the past quarter alone, private sector employment increased by 12,000. Although there has been, as the noble Baroness said, a decline in the number of people employed in the public sector, that decline has been proportionately very much lower than in the rest of the UK and has been very significantly outstripped by the number of jobs created in the private sector.

Reference was made to youth unemployment, which of course seriously worries us all, but youth unemployment was a long-standing problem in Wales. It rose by 74% under the previous Government. It is therefore hugely welcome that the youth claimant count was down by 3,500 in the most recent statistics in February last year. Once again, there appears to be a better picture.

The noble Baroness, Lady Gale, referred to women in the labour market. I am so pleased that she drew attention to that. Since May 2010, the number of women employed in Wales has increased by 36,000. I draw her attention to the fact that, on International Women’s Day, I hosted an event in the Wales Office with leading businesswomen and women in academia in Wales. She asked whether the UK Government had a similar scheme to the one in Wales. The Women’s Business Council has existed for a considerable time and is designed to encourage women at the top of business and to ensure that there is a better spread throughout the business world.

More people have been going out to work in Wales than at any time in our history. Since the election, 81,000 more people are in work in Wales. The employment rate, as has been noted, has increased by more than in any other region of the UK over the year, and unemployment in Wales is now below the UK average, at 6.7%. We absolutely agree that times have been tough for households as the economy recovers, throughout the UK and in Wales, but it is important to acknowledge that, last year, average earnings in Wales increased by 4.4%. That is more than twice the rate of inflation, inflation now being 1.7%, at a four-year low.

Central to the coalition Government’s measures to support families and those in work is the increase in the income tax personal allowance. Only last week, a further 13,000 people in Wales were taken out of income tax—in fact, that happened only yesterday—and 144,000 have already been taken out of income tax altogether in Wales. With our further increase in the personal allowance announced for April 2015, a total of 155,000 people will have been taken out of income tax in Wales as a result of the Government’s decisions. That will make a real difference and will be worth £805 per year to those people, providing a boost to living standards. I also say that, with 1.2 million people working in Wales, virtually everyone in work in Wales will have benefited from the income tax cut to the personal allowance. I see that there is a Division.

Sitting suspended for a Division in the House.

Thank you, my Lords, I will resume. I wanted to speak about the support for business that the UK Government have been undertaking. In the Budget, the annual investment allowance was doubled to £500,000 from the end of 2015 to support businesses across the UK in investing and expanding. There was a business energy package, which is important for Wales because businesses like Celsa have high energy requirements in Wales. That package will be worth up to £240 million to businesses between 2016 and 2019. We are also extending by three years the period in which enhanced capital allowances are available to companies investing in enterprise zones: until March 2020.

Mention has been made of the investment in broadband. I remind noble Lords that this is UK government money. The UK Government have provided £69 million to Superfast Cymru and £150 million to tackle mobile coverage across the UK. Some £10 million has gone to Cardiff and £6 million will go to Newport for the Super-Connected Cities Project, so the concern about broadband connectivity is right but it is important that we pay attention to the speed with which it is being tackled, as indeed the UK Government are tackling the issues of infrastructure across Wales and the UK.

The noble Baroness referred to a war on Wales. Scrutiny is not war, nor is criticism. With government comes responsibility—the responsibility to deliver. One must not confuse wanting the best for Wales, pointing out where there are problems, with talking Wales down. It is important that the Labour Government in Wales take that scrutiny on the chin, if I may put it that way, and accept that they have to take responsibility.

I welcome the constructive comments from the noble Lords, Lord Griffiths and Lord Rowe-Beddoe, about the key aspects of our economy, the higher education institutions and the airport, which are essential to the growth of the Welsh economy. This debate has highlighted the fact that Wales is on the up but there is a long way to go. The proof is there that this Government are creating the right conditions for growth, but we fully accept that our job is not done and that there is still a long way to go.

Committee adjourned at 7.07 pm.