WALES

HC Deb 28 February 1977 vol 927 cc49-107

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Tinn.]

4.23 p.m.

Mr. Nicholas Edwards (Pembroke)

We have arranged this debate in Opposition time for three reasons: first, because we thought it right that, after all the discussion about devolution, we should return to the issues that really concern the people of Wales—the economy, unemployment, inflation, and the price paid—

Sir Raymond Gower (Barry)

On a point of order, Mr. Speaker. I apologise to my hon. Friend for interrupting him. You, Mr. Speaker, made a statement, quite rightly, about the time available in this debate. Is it not appropriate that, if there is to be some sacrifice of time, it should be shared by Back Bench Members and Front Bench Members alike?

Mr. Speaker

I gave as broad a hint as I could.

Mr. Edwards

We should be discussing the economy, unemployment, inflation and the price paid for economic mismanagement in terms of social cut-backs.

The second reason is that, on the eve of St. David's Day, it seemed appropriate to debate Welsh affairs. Wales used to have an annual Welsh day debate at this time. These days, the Government put it off until the tail end of the Session, and then only late at night on a Friday. It is right that we should debate Welsh affairs in the middle of the Session as we approach the end of the financial year and on the eve of the Budget.

The Secretary of State for Wales (Mr. John Morris)

There has been no tradition in the time that I have been a Member of the House for this debate to be held at any particular time of the year. The time has varied with administrations.

Mr. Edwards

We used frequently to have debates at about this time, and on the last two occasions the Government have fobbed us off with a debate at an unsatisfactory time at the tail end of the Session. The Secretary of State knows that full well. The third reason is that today the Secretary of State will be celebrating the third anniversary of the election victory which placed him in office, and it is right that we should at this time examine the three years of his stewardship and seek to understand why his celebration will be a solitary affair, not shared by the people of Wales.

The unemployment figures may be taken as a gauge of the achievement of the Secretary of State. He took office when there were 38,000 out of work in Wales. He sought re-election eight months later when there were 40,000 out of work—not then blaming his inheritance, not—then forecasting disaster, but promising, according to the Welsh Labour Party manifesto, that Labour would continue to build on the firm foundations which it has already laid", and that it would provide even more jobs and a wider range of jobs". In May 1975 we had the first of this series of debates on the Welsh economy. There were then 51,000 out of work, and, no longer faced with the necessity of winning an election, the Secretary of State told the Welsh Grand Committee that unemployment would continue to rise for some months to come. He was right: it did.

In October 1975 we had a general debate on Welsh affairs. Unemployment had by then risen to 69,000. All my figures are on the new basis that excludes adult students and are therefore flattering to the Government.

By January 1976, after nearly two years in office, the Under-Secretary of State began to feel that pessimism was just a little bit out of place. Opening another debate on economic affairs, he told us that an encouraging start has been made in tackling our deep-rooted economic problems."—[Official Report, Welsh Grand Committee, 21st January 1976; c. 21.] Unemployment by then had reached 77,000—almost exactly double the figure that he had inherited 23 months before. Clearly the Under-Secretary of State had a unique concept of what is encouraging.

By November last year we were debating Welsh affairs against a background of about 80,000 unemployed. Today, as the Secretary of State celebrates the third anniversary of his assumption of the trappings of office, Wales suffers with 81,000 on the dole.

Every debate that we have had has marked a pitiless rise in the number of people out of work in Wales. In each debate we have had a declaration by the Secretary of State that the situation is unacceptable. Each debate has echoed to his increasingly shallow excuses. I imagine that he will celebrate this third anniversary by once again blaming it all on someone else.

I shall have more to say about unemployment later in the debate, because the overall figures mask the scale of the catastrophe that the Labour Government have imposed on parts of Wales. But first there are other aspects of the economy to examine, because the Secretary of State has repeatedly told us that his Government's prime task is to check inflation. In January last year the Under-Secretary of State boasted that the rate of inflation is falling. Indeed, we are on target to achieve 10 per cent. by the autumn".—[Official Report, Welsh Grand Committee, 21st January 1976; c. 9.] At the same time the Chancellor of the Exchequer was promising single-figure inflation by this year. In November the Secretary of State was careful to avoid the future, but he took credit for halving the rate that his Government had previously more than doubled.

Today single-figure inflation has receded over the horizon. On the Chancellor of the Exchequer's basis of 8.4 per cent. in October 1974, the inflation rate today is 23 per cent., and the Government continue to forecast an annual rate of 15 per cent. That means for the housewife that there has been an increase in prices since the Government took office of 65p in the pound, and at a time when personal income tax—that is, the tax paid by the average family—has more than doubled. Therefore, the consequence of the economic policies followed by the Government—the reward for the sacrifice of 81,000 Welshmen.is inflation at double the rate of our competitors overseas.

The same dismal story is revealed by the index of industrial production for Wales. When they came to power, the Government boasted that they got Britain back to work, but the fact is that Welsh industry is producing less today than it did in the first quarter of 1974. It is producing less than it produced as far back as 1971. Britain at work under Labour produces less than it produced in a three-day week.

No doubt the Secretary of State will plead that things are a little better than they were in the dismal trough of 1975, but the recovery of the first quarter was not sustained later in the year and the forecast on which the Chancellor based his spring Budget will not be fulfilled. Perhaps when he assumed office the Secretary of State wished to be remembered for something, and I suppose that it is some kind of grisly record to be a member of an Administration which, over a period of three years, has achieved and then maintained record inflation, record taxes, record unemployment, and an unprecedented fall in industrial production.

No doubt we shall have the usual tear jerking stuff this afternoon about how hard it has been to bear and how determined the right hon. and learned Gentleman is that one day it will all be different. We have had it all before. Three years is enough for anyone.

I return to the subject of unemployment, which was running at 8 per cent. in January and 7.8 per cent. in February, or on a seasonally adjusted basis, 7.3 per cent. in January and 7.2 per cent in February. In parts of Wales the situation is much worse. In several of the valleys of Glamorgan it is 10 or 11 per cent. and in Wrexham, in spite of the success in developing its industrial estate, it is more than 10 per cent., but in the Western peninsulas things are on a different scale altogether. In the North unemployment is at more than 14 per cent. In Anglesey and in Blaenau Ffestiniog it is 14.1 per cent.

If that is bad, the situation in the South-West can only be described as shocking. In the constituency of the hon. Member for Cardigan (Mr. Howells) it is between 17 and 20 per cent., and in my constituency in January it was 15.7 per cent. in Fishguard, 21.1 per cent. in Milford, 19.1 per cent. in Pembroke Dock, 20.8 per cent. in Tenby. The situation was only marginally better in February. Matters have achieved a crisis condition when male unemployment in a whole group of neighbouring employment areas rises to well over 20 per cent., more than one in five of the male insured population out of work.

A look at the map of development areas in Wales indicates the illogicality of the present position. By far the most grievously affected area of Wales has not been granted special development area status. One of the most seriously threatened areas, the North-East, is designated only as an intermediate area. The Secretary of State will know, and he will not be surprised, that local authorities in West Wales have demanded that the Milford and Pembroke Dock employment exchange areas should have special development area status, and should be the subject of increased investment and promotional activity.

This debate will give the Secretary of State an opportunity to respond to that demand. He should realise that it is not just a question of percentages but that the total number of out of work is alarmingly high. There are more unemployed in Pembrokeshire than in the cities of Swansea and Newport or in the group of employment exchanges around Ebbw Vale. Furthermore, there is the threat hanging over us of British Rail's decision to terminate the Fishguard to Waterford cargo service. I shall have more to say about that when we debate transport in the Welsh Grand Committee shortly, but we should now concentrate on the future rather than arguing about the failure of British Rail's management over the last two decades. Those now in command are revealing commendable determination to make a success of the port. The closure of Fishguard, with its consequences for employment and economic activity in North Pembrokeshire and the future of the whole West Wales railway service, is too awful to contemplate.

The Government have refused an inquiry into the activities of the shipping division out of Fishguard, and therefore they have a clear obligation to satisfy themselves completely with the figures submitted by British Rail to ensure that every possible step is taken to guarantee a successful future for the port. The whole future of Fishguard lies in the hands of nationalised industries, but in three other parts of Wales the Government would be misleading the people if they pretended that this was so. The fates of Port Talbot, Shotton and the South Carmarthen power station, each important in its own way, are all dependent on Government decisions. When I visited the Welsh Development Agency and inquired what action by the Government would most immediately assist it in tackling the industrial problems of South Wales, I was told that in the Eastern valleys it wanted to see urgent improvements to the stretch of road between Raglan and Abergavenny, which would do more than anything else to improve access.

In West South Wales, the Agency had no hesitation in calling for a decision on the investment programme at Port Talbot, not just for the future of the steel works itself, but for the future of literally hundreds of companies which are dependent on it. The hon. Member for Gower (Mr. Davies) has spoken in successive debates about the crisis facing the tin plate industry, growing fears among tin-plate workers and the critical importance of this industry for the economy as a whole.

During a visit to a Swansea firm I found a small but significant example of the absurd situation in which we find ourselves. The factory was originally established in Swansea because of its proximity to Port Talbot, but it is now getting none of its steel from that source, and has to get some from Germany, since Port Talbot does not produce the hot-rolled coil required. The Port Talbot decision has been almost grotesquely mishandled by the Government. It has become a sort of symbol of how not to manage our industrial areas. If we want to guarantee failure as a nation, we shall spend three years shilly-shallying over major investment decisions, as the Government have with this one, and arrive at political conclusions on economic issues which are illogical and indefensible as is the Government's interim authorisation of half the investment programme demanded by the British Steel Corporation.

The cry goes up all over Wales that the BSC should go ahead with the £350 million investment programme, which will increase the price of the product, because people see that as the only way to force the Government to agree to an essential part of the programme which would increase Port Talbot's steelmaking capacity. That is an unreasonable demand to make of the BSC. Before it proceeds with the new strip mill, coke oven and continuous casting machine, the BSC is entitled to know whether it is to become a 6 million-ton plant.

Nothing is worse for industrial confidence and the economy than indecision. On steel we have had three years of indecision and Welsh industry has been blighted as a consequence. There are rumours around that at long last, almost unbelievably, the Government may be on the point of taking a decision about Shot-ton. Perhaps the Secretary of State will announce it this afternoon. It is hard to to see any reason why he should delay any longer. I find it hard to believe that Shotton will not be permitted to live, but whatever its fate people are entitled to know, and the failure of the Government to tell them is shocking and in defensible.

I regret the absence due to illness of the hon. Member for Carmarthen (Mr. Evans) and wish him a speedy recovery from his operation. I raise the question of Carmarthen Bay power station not only because of the bleak employment prospects of the Burry Port without it, but because I think we are entitled to know the results of the consultations announced by the Secretary of State for Energy in 1975 about the inter-relationship with coal mining and the demand for coal in generating electricity. We now have the remarkable and disturbing situation in which all the coal being burned at Burry Port comes from not the NCB but from 10 licensed pits which can sell it more cheaply. There has been a series of disastrous setbacks in the process of getting the Aberthaw coal-fired station operational. The National Coal Board has a stockpile of a million tons of low-volatile Welsh coal and is increasing its stocks at the rate of 6,000 to 7,000 tons a week.

What is at stake is not just the future of the power station, but the fate of three NCB mines and about 10 licensed pits. Whatever the economic arguments for closing the remaining four generating sets at Burry Port power station, there may be a case for making adjustments to the price structure so that the stockpile can be burned. It is almost certainly useless anywhere other than at the Aberthaw and Burry Port power stations. In that way we can use this energy resource in that part of the South Wales coalfield.

I have received representations from local authorities, management and the unions and so, I know, have the Government. While this is primarily a matter for the Secretary of State, the economic and social consequences are important in the South Carmarthenshire area. I think it reasonable to ask the Secretary of State to remove some of the anxieties that now exist.

In my speech I have repeatedly referred to anxiety and uncertainty and to the importance of these factors on industrial confidence and investment. I cannot recall a time of greater uncertainty over the prospects for agriculture. In conversations with farmers as far apart as Pembrokeshire, Clwyd and Brecon I found a mood of bewilderment. There is difficulty in calculating the consequences for farm prices of the European Commission's proposals, but, more important, there is no way of knowing what the final decision of the Council of Ministers on these proposals will be. If accepted, they might form the basis on which farmers can plan with some certainty and not entirely without a hope for the future.

However, those engaged in agriculture have heard with apprehension the comments by Mr. Jack Jones and others on any green pound devaluation and the cryptic statements by the Minister. Above all, they demand to know what the decisions are. It is getting very late for farmers to plan their pattern of expenditure, and if there is to be a retrenchment they want to know. If, on the contrary, the Government want farmers to make the contribution of which they are capable, decisions must be taken which will enable them to recoup a large part of the £900 million increase in costs that they incurred last year.

The White Paper "Food from Our Own Resources" promised us expansion, but where we should have been 6 per cent. up we are 23 per cent. down. It is not a very good start. Welsh farmers, with their dependence on beef, are particularly affected by the large discrepancy between Irish and Welsh prices. Anxieties about Irish imports are understandably—and these have been referred to the right hon. Member for Anglesey (Mr. Hughes)—particularly at a time when there are still doubts about the whole future of the beef regime after the summer. The message that I am sure farmers would wish me to give to the Secretary of State is: "Remove our fears". Let us have firm decisions so that we have a firm base upon which to plan.

A firm base upon which to plan is what the small business men of Wales demand also, and it is the one thing that the Government have not given them. The small businesses have a critical part to play in the Welsh economy. Over much of Wales they represent a major sector. It is from among them that the bulk of our employment derives. It is on the foundation they provide that our future must be built.

I was encouraged in my recent conversations with the Development Agency by the realism of its approach. It sees little prospect of attracting major investment projects to Wales in the immediate future. It does not look to any massive injection of overseas capital. Instead it proposes to seek an expansion of the small and medium firms which exist in Wales. It seeks to assist them with their critical cash flow problems in these difficult times and by improving their capital base.

That is a particularly wise approach in view of the Government decision announced last Thursday. The decision was taken for a quite understandable reason, but it means that Wales has suffered another serious setback in its attempt to attract new industry from outside. News that an advance factory programme costing £12 million is to be launched in the shipbuilding areas of the United Kingdom must be a serious blow to our hopes. We now face a major new element of competition in filling our empty advance factories.

Unfortunately, the Development Agency has to do its work against a background of shattered confidence, the result largely of Government actions that might almost have been deliberately designed to weaken the cash position of firms and discourage them from future investment. One day, perhaps, the Secretary of State will learn that injecting cash by means of grants or by provision of factories is no substitute for profits. It is a remarkable fact that advance factories built since 1964 have provided only 3,650 jobs for men and 2,330 for women at the last count. That is fewer than they provided a year ago.

Mr. Neil Kinnock (Bedwellty)

Does not the hon. Member acknowledge the whole lesson of history, which is that when profit was the only spur to industrial development in Wales, we had no industrial development of any kind other than the exploitation of natural resources, and when they dried up it stopped altogether?

Mr. Edwards

The hon. Member can draw whatever lessons he wishes from history. However, Government action is fruitless unless companies can produc the cash to plough back. Without that there is no prospect for the businesses of Wales, and the experience of the last two years, whatever the experience of the previous decades and centuries may prove, establishes that almost without question.

One would have thought that after three years of the kind of disaster that I have outlined to the House the Government would really have begun to realise that their approach is hopelessly at fault. No sooner had Welsh business absorbed the new payroll tax imposed in the Chancellor's summer Budget—and that was a massive blow—than it was winded again by the decision to remove the regional employment premium at one go, without warning and without consultation. That will cost Welsh industry in a full year about £32 million. We are told also that £5 million is to be handed back to the Development Agency. That blow coincided with the imposition of record interest rates.

Faced with this triple blow to their cash resources, dozens of Welsh firms abandoned their investment projects for the time being and although interest rates are now falling many of them will be inclined to wait to see whether they fall further still. I see that the Secretary of State looks sceptical, but this was the considered view of the Welsh Development Agency when I discussed the matter with it. It says that it is a real problem that not only has confidence been shattered but it will take some time to restore.

In a situation of falling interest rates people are bound to hold off their investment decisions. They would be mad not to do so. Why borrow money at a high rate if it seems that the money will suddenly become cheaper? The Secretary of State says that I am illiterate, but I suspect that I am not as economically illiterate as he is, and we have his record to prove how economically illiterate he is. The Welsh people are paying the price of his economic illiteracy. The right hon. and learned Gentleman now seems to be telling me to cool down, but why should I cool down when the Welsh people are suffering from his incompetence? I see that the Secretary of State thinks that this is a joke. He is laughing at the fact that there are 81,000 people out of work in Wales today. He is laughing at the economic plight of Wales, and I hope that Wales takes note of the fact—

Mr. John Morris

I was laughing at the hon. Gentleman.

Mr. Edwards

As if all that was not enough, we then have Bullock. Whatever may be the long-term effects of this disastrous report, the immediate impact will be further to discourage investment. Within the last few days I have received news of overseas companies with subsidiaries in Wales cancelling their investment plans until the threat of Bullock has been removed.

Mr. Kinnock

Oh, really!

Mr. Edwards

The hon. Gentleman may show scepticism, but I have specific instances where this has already happened. The truth is that the Government and their supporters hate to be told the reality as it affects Wales. Even worse, they simply do not begin to understand the realities, and this is the tragic situation that faces the Welsh people.

So we face the situation in which the economic recovery of Wales is dependent upon confidence that does not exist, upon profits that companies are not permitted to make, and upon incentives, personal and corporate, that the Government have almost entirely destroyed. The prospect is that for another year we shall suffer record unemployment, record inflation and stagnant production. In the meantime the Government cling to office hoping against hope that something will turn up to save them. Throughout their period in office they have given more thought to their own survival than to the interests of the Welsh people.

The Secretary of State will now get to his feet and tell us of the great problems he faces. Shamelessly he will deny responsibility for what is passed and will claim credit for the recovery that he will tell us he can discern at the end of the tunnel. I suppose that the kindest thing that might be said of the Secretary of State is that he has done his best. That, on this, his third anniversary, may give him some consolation, but it will give little to the long-suffering people of Wales.

4.50 p.m.

The Secretary of State for Wales (Mr. John Morris)

We all listened to the hon. Member for Pembroke (Mr. Edwards) when he began by saying that I would be celebrating three years in the Welsh Office but that it would be a solitary celebration. I think that Wales should know that the hon. Gentleman made his remarks when there were only two Tory Back Benchers in the Chamber listening to his tirade. That fact should be recorded. The hon. Gentleman has monotonously called for my resignation from the moment he was prematurely elevated to the Opposition Front Bench.

Sir Anthony Meyer (Flint, West)

Has the right hon. and learned Gentleman just given an example of his arithmetical genius? I count three Tory Members present.

Mr. Morris

The hon. Gentleman has fallen into the pit into which I expected him to fall, because there were two Tory Members present when the hon. Member for Pembroke began his speech and the hon. Member had not arrived on the Opposition Benches at that stage.

Sir A. Meyer

I apologise. I had to provide a quorum for a Select Committee.

Mr. Morris

Whatever virtue there is to the presence of three Opposition Members as opposed to two during a debate, it is an indication to the people of Wales of the interest shown in the tirade of the hon. Member for Pembroke.

Mr. Nicholas Edwards

It would not be unbecoming of the right hon. and learned Gentleman to express some sympathy for my hon. Friend the Member for Cardiff, North-West (Mr. Roberts), who is unable to he present because of ill health.

Mr. Morris

I certainly express sympathy for any hon. Member, from either side of the House, who is ill. However, if there were any justification for the vote of censure that the hon. Gentleman seemed to be adumbrating against me, I should have thought that he would have more support on his side of the House. However, it is a maximum of three.

The hon. Gentleman is under the impression that the debate is improved by the addition of insults. "Shallow excuses" were the words used; "Tear-jerking stuff". Good luck to him. We have heard such remarks from him in every debate. He came to Wales looking for a seat. However, his hectoring manner has hardly endeared him to the people of Wales. In due course he will depart from Wales and seek lusher pastures, more attuned to his qualities, in Sussex or Surrey. Long after the hon. Gentleman has left Wales—

Mr. Nicholas Edwards

Nonsense.

Mr. Morris

It is time to tell the hon. Gentleman what we in Wales think of him. He is an absentee. We know that. I have endured his insults for three years. It is right to tell the hon. Gentleman that long after he has left Wales my hon. Friends and I will represent Wales and that his party has been rejected by the people of Wales since 1850, if not earlier.

I trust that the House will understand that if I do not dwell unduly on transport today it is not because of any lack of concern on my part as to its importance in the economy of Wales but because we hope to return to that matter shortly in the Welsh Grand Committee. It is to me, as the House knows, a most important key to our economy and its future.

We begin, rightly so, with the present level of unemployment. It concerns all of us. To listen to the hon. Member for Pembroke one would imagine that only the Opposition were concerned with the economic situation and unemployment. Unemployment cannot be divorced from the economic situation. It flows from it. It is not a peculiarly Welsh problem. It is not even a peculiarly British problem. Not even an Offa's Dyke, the English Channel, or the Atlantic Ocean can shelter us from the world-wide effects of a recession.

Therefore, it is right, appalled and concerned as we may be, to put the situation in its right perspective and to seek to assess what has been done. Today the Opposition were as barren and as sterile as usual in their lack of any constructive ideas. There is nothing new in that.

The reality of the situation is that the measures which the Government have introduced have directly saved 22,000 jobs in Wales. That is equivalent—the hon. Gentleman may not know it—to a little more than 2 per cent. on the unemployment roll. The work experience scheme, the youth employment subsidy, the temporary employment subsidy, the job creation scheme, and the community industry schemes have all played their part. When we add them up we are able to take account of the effect on the employment scene, and very welcome it has been.

There is nothing more disheartening than for a young boy or girl to leave school and find that there is no work for him. I take some comfort from the fact that last month's figures of school leavers unemployed had come down from 3,526 to 2,894, and this has been the trend since the very high figure of 13,200 in August 1976.

I should like to make one comment on the job creation scheme. It is apparently enhancing the prospects of being taken on in regular employment. Between 40 per cent. and 60 per cent. of persons taken on by the JCP scheme are leaving to enter permanent work.

The Government also attach great importance to the provision of training facilities to ensure that there is an adequate trained labour force ready for economic recovery. The number of training places provided by the Training Services Agency in Wales, mainly in its skillcentres and in colleges of further education, has been increased, and the number of people who have completed courses has risen from 3,000 in 1973 to well over 5,000 last year.

The hon. Member has mentioned the withdrawal of Regional Employment Premium, and I suspect that the subject will also be raised later in the debate. Of course it would have been very welcome if we had been able to retain it, but the Chancellor in his statement of 15th December had to take account of the overriding aim of ensuring that sterling was strengthened, and public expenditure had to take its share of the burden in he case we made for negotiating the IMF loan and funding the sterling balances.

Of course, some firms in Wales have complained about the withdrawal of REP. I understand their complaints. I have met them. I cannot understand how the hon. Gentleman has the face to complain, because he has advocated a much greater slashing of public expenditure, although quaintly he argues from time to time in favour of additional public expenditure in his own constituency. He has been fully exposed on that score. The fact is that we had a very difficult choice to make on REP, and the decision must be judged in relation to our policy of giving the highest priority to industrial investment and to expansion, as well as our measures to reduce unemployment.

In addition, the value of REP has been substantially eroded since it was first introduced in 1967. At that time it represented about 7 per cent. of average wage costs. This compares with only 3 per cent. under the equalised rates which were due to be introduced. In current public expenditure circumstances—this is what the hon. Gentleman should take account of—the Government could not consider increasing REP by the £200 million or more which would have been needed to restore the premium to its original real level. It is doubtful, therefore, whether REP would now be of much effect in generat- ing and maintaining employment in the special development and development areas. Indeed, a large proportion of the payments were made to firms that would have maintained their operations in or transferred them to these areas in any event. So we decided that these payments should give way to more selective measures to create investment and employment, and an additional £80 million is being made available in each of the next two years for selective assistance to industry. These measures will include a new selective investment scheme which will play a significant rôle in fostering the growth of the identified sectors in the United Kingdom economy. I hope that firms in Wales will seek to benefit from this form of assistance to the key sectors.

Mr. Kinnock

Am I right in thinking that that £80 million is for the whole of the United Kingdom economy?

Mr. Morris

Yes, it is. But in Wales we also have in Section 7 of the Industry Act assistance to foster growth—and I shall be saying more on this later on.

In addition, more funds are to be allocated to the National Enterprise Board. The Welsh Development Agency will get an additional £2½ million in each of the next two years and more money is to be provided for sectoral schemes to improve the efficiency of particular industries. All these schemes are designed not only to promote investment but also to improve industrial performance and competitiveness. Such an improvement is essential to national prosperity. The assisted areas have already received substantial aid under existing schemes and projects in Wales will, of course, be eligible to benefit from the additional expenditure now being provided. The effects of the withdrawal of REP will also be mitigated by the extension of the temporary employment subsidy and the job creation programme, for which applications may now be submitted up to the end of April 1977, when the future of the schemes will be further reviewed, along with the other new measures to relieve unemployment which we have recently introduced.

I recognise that the notice was short, but our overriding objective was to restore confidence in sterling and particularly to get interest rates back to the levels of the previous summer. Our success in this must have eased the cash flow of many firms in Wales and so will help to preserve employment and investment opportunities. It was the rationale of the Member for Pembroke that faintly amused me before and certainly not the level of unemployment, as he knew quite well. I believe that in retrospect it will be seen that our priorities were the right ones for industry.

We are at a turning point. Manufacturing investment in Wales is on an upward trend rising from 6.1 per cent. of total United Kingdom investment in 1974 to 8.5 per cent. of the nation's manufacturing investment last year, and we know that investment is expected to rise by 15 per cent. in the coming year. This is on the right lines and Welsh firms are in the front of the drive for exports. This is particularly important when home demand is sluggish.

Leading Welsh exporters have achieved significant increases of the order of 30 per cent. in their exports over the past two years. About 750 firms use the export services of my Industry Department. My officials average about 500 visits, or interviews each year. Last year there were 8,000 inquiries. What is extremely encouraging is the way firms are responding to the opportunities which are available overseas. Exporting is not easy: it is hard and unremitting work, but time and time again I was impressed by the number of firms exporting 30, 40, 50 and even 70 per cent. of their total production. It is in the firm's own interests but it is very much in the national interest, too. Very roughly, an increase of 1 per cent. in the share of world trade for the United Kingdom could in Welsh terms means 20,000 jobs.

The Development Corporation for Wales and other bodies are playing an important rôle, too. During 1976 the Development Corporation mounted five trade missions to major market areas of the world and is planning visits in 1977 to Brazil, Scandinavia, Australia, New Zealand, Japan and Hong Kong. Against this background, with the large increase in investment expected in the coming year and the inflow of North Sea oil, which will transform our balance of trade, it is no surprise to note the greater confidence expressed by the CBI in its last report. To continue this improvement we must successfully renew the social contract; given success on this, there is no doubt that, after a lag, unemployment will begin to fall.

Turning to individual industries, the particularly good news has been the decision of the board of Hoover to go ahead with its investment at Merthyr. This was a problem on my desk when I took office, and I discussed it with the board at Perivale with Mr. Mansager, the then chairman, and subsequently in America. I was able to meet him again in Cardiff when he brought a top team of chief executives of some of the biggest firms in the United States of America to this country at the invitation of the then Prime Minister. My office, the Department of Industry and the Welsh Development Agency were happy to continue discussions with Mr. Rawson, his successor, and his team.

The success of this extensive negotiation and consideration by the board of Hoover was marked by His Royal Highness Prince Charles a few weeks ago performing the opening ceremony of the development at Merthyr. A tremendous amount of effort has gone into this project, and preparing the site and building the factory is now one of the major tasks of the WDA. This by any standards is a massive project for a Government agency, at a cost of over £10 million, and the overall Government contribution will be much more.

The welcome decision by Hoover, which I announced on 10th January, to proceed with their expansion at Merthyr Tydfil is of major importance from many standpoints. It will provide a very welcome boost to employment prospects in the Heads of the Valley. Perhaps the most significant aspect of Hoover's decision is the simple fact that it has shown that a major United Kingdom company—part of an international American-based undertaking—has the faith and foresight, notwithstanding the present difficult economic climate, to demonstrate its confidence in the future of the United Kingdom and the Principality by embarking on this major investment.

The steel industry, both in the public and private sectors, is undertaking major investment programmes. The Government expect very soon to receive the British Steel Corporation's plans for Port Talbot and Shotton but in the meantime considerable activity is going on in an extensive programme of plant replacement at Port Talbot. I could not understand the hon. Member for Pembroke's references to the coke oven and the "con-cast" facility. The first is proceeding—the hon. Gentleman may not know it—and the second is being considered by the BSC. The total value of those two parts of the scheme is £100 million.

Major schemes to provide additional steel finishing capacity at Shotton and Ebbw Vale are nearing completion. Within the last week, the British Steel Corporation has announced plans for proposed investment of £73 million in modernising and developing finishing plant for electrical steels at the Orb Works in Newport, which will provide some 190 new jobs. The reality is that the BSC now has £330 million worth of major development in progress in Wales or recently announced.

In addition to the BSC's current investment programme, substantial expenditure is of course being incurred by the private sector of the industry in Wales. GKN's new rod mill and electric are steel plant which was opened earlier this month by His Royal Highness the Prince of Wales form the major part of a £51 million development scheme in Cardiff. This is matched by the £48 million development which the same company is undertaking at its Brymbo Works near Wrexham and also by the installation of new steelmaking plant by Duport Limited at Llanelli. These are significant and major pieces of development in Wales.

Despite the increased costs, the Government intend to support the NCB's "Plan for Coal" dealing with the situation up to 1985 through its periodic review of the NCB's corporate plan and investment programme, and, as hon. Members know, a Bill to provide for the future is at present before the House and contains important financial provisions for future investment in coal. These measures will have particular relevance to Wales, where substantial investment in the mining industry is already in hand or planned. The new mine at Betws, near Ammanford, which the Prime Minister and I visited last year, which is being constructed at a cost of £12 million, is well on schedule to come into operation in April 1978. But there are other, important investments, such as those at the collieries of Treforgan, Blaenant, Aberpergwm, Windsor/Nantgarw and Oakdale, also under way.

With a £3 million project announced in January to top 6 million tons of coking coal at Lady Windsor/Abercynon Colliery, the total investment in new mining and reconstruction schemes in South Wales has reached £40 million in the last three years. I make no apology for going through the massive investment in the public sector in Wales, which plays such an important part in the Welsh economy. These are massive figures which speak for themselves.

The coal industry in South Wales still provides employment for a total of some 38,000 people. Its position in the Welsh economy is, therefore, one of prime importance and the Government are providing for and expecting the industry in South Wales to play its part in reaching the targets set. This is a major contribution, and I am sure the whole House will be delighted to hear the position with regard to the public sector.

I now turn to selective financial assistance. Since I assumed responsibility in Wales in mid-1975 I have noticed a tendency for attention to be focused on a handful of large cases. Hon. Members on both sides of the House have given me great assistance in the handling of some of these cases in the period during which I have been responsible. I want to pay my tribute and thank them for their advice and judgment as well as their advocacy for their particular areas.

I have noticed a tendency for attention to be focused on a handful of large cases, particularly those involving the rescue of undertakings in financial difficulties. I would in no sense wish to underestimate the importance of these cases, particularly in view of the large numbers of jobs involved, but it is easy to overlook the vast bulk of the cases. In many instances these involve the offer of assistance for expansion of small or medium sized firms and attract little publicity. But taken together they will have a very considerable impact on the development of industry in Wales. Some will provide the nucleus of future entrepreneurial growth and others have a particular importance for the smaller communities in which they are located.

Since 1st July 1975 my Department has made 167 offers of Section 7 assistance, of which 153 have been in respect of expansion, employment-creating projects. The value of the offers made during the period amounts to over £22 million. The project costs associated with these offers amount to close to £140 million, so we are getting very good value for money from this form of assistance. Indeed, a surprising number have succeeded in beating their targets. I am convinced that Section 7 assistance is an invaluable part of our armoury for bringing about economic growth in the Principality, although this inevitably must be primarily dependent on the general recovery in the United Kingdom economy.

I now turn to the Welsh Development Agency. In the first year of its existence it has naturally been concentrating on building up its organisation and carrying on with the responsibilities it took over on its inception. It has carried out wide consultations with local authorities and the Welsh TUC and CBI on general economic and industrial matters and particularly on land reclamation. I of course meet the chairman and chief executive regularly and recently I had the opportunity of meeting the full board for a full and frank discussion of a wide range of topics that go to the heart of the Agency's activities and aspirations.

The Agency's most important new function is its support, whether financial or otherwise, of industrial development. Hitherto, it has been in a responsive position, necessarily, because of the need to secure new and expert staff. Nevertheless, some 200 inquiries have already been received and over 50 of these are currently being closely examined to establish their potential contribution to the Welsh economy. The Agency has now recruited more staff and will be able actively to seek out opportunities for investment. This more positive rôle it will pursue in all sizes of ventures, but it is specifically concerned to help and encourage indigenous Welsh industry.

I welcome this particularly since we cannot at the present time count on a great flow into Wales of industry from elsewhere in Britain, or indeed from overseas. I am delighted to say, too, that both the Agency and I have received from the CBI (Wales) a warm welcome of the Agency's capacity to encourage and foster the growth of Welsh entrepreneurs. My hon. Friend will give more details of its on-going responsibilities in land clearance and factory building. What a different picture from the views expressed by the Opposition when we were seeking to get through the Bill to set up the Welsh Development Agency.

We announced our commitment to and achieved the setting up of the Development Board for Rural Wales, which comes fully into effect on 1st April of this year. Its specific functions are to promote the economic and social development of its area and I would stress the importance the Government place on the social dimension. The Board's main task is to regenerate the economy by assisting the development of light industry and other sources of employment, but it will look beyond the economic factors and play a part in the social development of the area in the widest sense. While Newtown will necessarily absorb a large part of the Board's budget in its early days, looking ahead the Board will view the needs of the area as a whole and Newtown will be but one piece, albeit an important piece, of the general Mid-Wales picture. This is one of the strengths of the Board. For the first time one agency will be able to range over the whole field and pull the various threads together in Mid-Wales.

I hope that I shall be forgiven if I do not today deal with agriculture as I usually do at some length. I keep in close touch with the farming organisations and I have met them on three occasions in recent months to discuss their problems. We are now in the middle of the annual price fixing discussions and I hope to participate in the Council of Ministers on 14th–15th March in Brussels.

There are many matters on which I would wish to have commented today. In my three years as Secretary of State Wales has had to weather a severe world recession and of course it has hit employment in the Principality hard. Yet there is enough confidence in the longer-term prospects to make possible the large investment projects to which I referred earlier. But of course there have been economic problems causing concern in Wales and that is why it has been so important to discuss these problems with both sides of industry. That is why I value greatly the national organisations in Wales available to me for discussion, the Wales TUC, the Wales CBI, the farming unions, the local authority organisations. Many of these bodies and organisations covering the whole of Wales are of recent origin, but they have already proved their worth.

I believe that in our investment in infrastructure in Wales—the roads, the houses, the land clearance, the factory building, the water and the sewerage, the provision of funds for nationalised industry investment, the welcome growth in private industry investment—we have laid good foundations for the future. Despite the continuing difficulties in the period immediately ahead, I have no doubt that we are building well and fairly for the Wales of the future.

5.18 p.m.

Sir Raymond Gower (Barry)

In some ways I should like to congratulate the Secretary of State because he sounds much more confident about the position in Wales than anyone else with whom I have discussed this subject in the last six months. I hope that the right hon. and learned Gentleman's confidence is entirely justified. But I must warn him that those who are employed, or are in positions of experience, in many of our great industries in the Principality have not shown the same confidence about the present or the future as the right hon. and learned Gentleman has shown in his speech today.

In his opening speech my hon. Friend the Member for Pembroke (Mr. Edwards) made an incisive attack on and indictment of Government policy in recent years. I think the Secretary of State felt that my hon. Friend had made an exaggerated attack, and responded as though it was quite unjustified. In reply to that, I say only that it is not surprising that any Opposition should express concern about the state of affairs after this Government have been in office for three years. Any Opposition party, any parties in opposition, or any part of the opposition must be critical of these figures.

In my view, the figures speak for themselves. I accept that the Government have had to face difficulties, and I have no intention of being unfairly critical. I appreciate that there have been world difficulties. However, some of these private enterprise countries such as Holland and Germany have been doing far better than we have.

Mr. Kinnock

Because of Tory rule.

Sir R. Gower

No. It is because they have been practising private enterprise successfully without the inhibitions of those who seek to destroy the system in this country. That is the difference.

The figures about which we are concerned are at least three or four separate ones. I suggest to the Secretary of State that an unemployment level approaching 81,000 in the Principality is one which gives rise to considerable concern, especially as regards its incidence in certain parts of the Principality. I believe that the right hon. and learned Gentleman was born in the county of Cardigan. I was there on holiday last year, and I discovered that the incidence of unemployment in that part of the country was very severe. What is more, as my hon. Friend the Member for Pembroke knows, there are appalling figures in parts of his county. I appreciate that there is never any even figure and that in certain areas it is always worse than the average. But this unemployment situation has been accompanied by a very high inflation rate, which even at present is running at 22 per cent. or 23 per cent. per annum, and this aggravates the conditions which create industrial problems and unemployment.

Then we have this problem of industrial production. Towards the end of his speech, the right hon. and learned Gentleman said that this was now showing signs of reviving and improving. I hope that he is right. The fact remains, however, that at times it has been less than it was during that often recalled three-day week of three years ago.

Mr. Nicholas Edwards

It still is.

Sir R. Gower

As my hon. Friend says, it is even at this moment.

There is also the problem of industrial investment. Industrialists and companies have been criticised. But no one can expect growing investment against the background of figures like these.

I noticed that the Secretary of State carefully avoided any reference to the plight of the construction industry in Wales. I hope that he is aware of the difficulties of building companies, to say nothing of those which produce sand, gravel, cement and bricks for the building industry. The construction industry is in a very serious state, and it is not the only one. I mention it only because it has been omitted from previous discussions. I hope that the Secretary of State will do all in his power to assist the construction industry. As he knows, some smaller builders face serious problems in continuing in existence, and this is certainly not a sector of our economy where there are signs of improvement. All the indications at present are that the situation continues to deteriorate.

A generation is growing into manhood in the Principality who cannot recall those much criticised years between 1951 and 1964 when, on the whole, the standard of living improved steadily for the majority of our people.

Mr. Cledwyn Hughes (Anglesey)

The hon. Gentleman always seeks to be fair in his assessments. Now that he is dealing with the period between 1951 and 1964, will not he agree on any assessment that our present ills are to a large part attributable to the failure to invest during that period?

Sir R. Gower

That may be partly the case, but I think that it is probably a criticism of our whole system that there has been some failure over a long period. The situation was undoubtedly aggravated after 1964, and I still maintain that one very great difference between this country and many of its most prominent rivals is that in those countries there has been no fear of the appropriation of businesses and industries. There has not been the same fear in Holland and Belgium. In most of our rival countries, the Social Democrats have abandoned the practice of taking industries into State ownership. As a result, they have been able to build for the future with far greater confidence than anyone in this country.

The right hon. Member for Anglesey (Mr. Hughes) is also very fair. He must realise that some of our successful companies have faced a terrible predicament in recent years. In some cases, if they were too successful, they faced the possibility of nationalisation. There was even an incentive to remain below a certain size in some of the nationalisation schemes. That is the appalling position that we have arrived at in this country in recent years.

Mr. Donald Anderson (Swansea, East)

Surely a reading of history shows that the Government have quite wrongly nationalised the failing industry, whether it be shipbuilding or whatever.

Sir R. Gower

I am pointing out merely that certain companies have been nationalised if they have been above a certain size, so that businesses had an incentive not to grow beyond a certain size. That is the ridiculous nature of the problem which has arisen in some instances, though I admit not in all.

I hope that the confidence of the Secretary of State is well placed. However, I do not think that he can complain if we express anxiety about the situation as we see it today.

I make a special plea to the right hon. and learned Gentleman on behalf of some of our smaller businesses, and I do so not on any political or partisan grounds. I agree with my hon. Friend the Member for Pembroke that these are the acorns from which bigger enterprises grow. I hope that the right hon. and learned Gentleman will realise the difficulties which many of them have been facing for a considerable time. I do not want to overstress the difficulties, but one of them is the phasing out of the regional employment premium. The complaint of most of those who have spoken to me is not that it is being phased out but that it is being done at such intolerably short notice, and so quickly.

Cannot the Government reconsider their decision at least to this partial extent? If they could only make some concession on the speed of the phasing out of REP, they would meet many of the criticisms. Most industrialists and others with whom I have discussed this problem acknowledge the difficulties of the Government. They quite see that there may be a case for ending this kind of assistance over a period. But they feel that the Government should have taken greater account of the fact that companies, like other bodies, have to plan ahead. They had no reason to plan on the assumption that this would come to an end so suddenly. It is the suddenness of the decision and announcement and the speed at which it is to be ended which have caused the criticism. If there could be some reconsideration of this, it would go a long way to assist them.

It may be that my hon. Friend the Member for Pembroke overstated the position in his reference to Bullock. I have met associations of industries and of bodies connected with industry in recent weeks, and they have expressed their great concern about the possibility of legislation which is not similar to that on the Continent and which is not comparable with what has happened in West Germany. On the whole they deplore the findings and recommendations of the majority report of the Bullock Committee. None of the members of the Committee had any experience of productive industry. The Committee was a collection of one or two distinguished trade unionists and some academics. Not one person who signed the majority report had any experience of the management of industry.

As I promised to abbreviate my remarks I shall make brief reference only to a constituency problem. I shall reserve references to transport matters but I feel that I must refer to the extension of the M4 motorway. On the whole we applaud the Government's decision to proceed as quickly as possible. I recognise that in many ways the plan is going ahead in a very encouraging manner.

Certain undertakings were given at the inquiry and subsequently that as far as possible care would be taken in the building of the motorway to avoid destroying the amenities of residential areas with the feeder traffic of large vehicles. However, as the Secretary of State knows, there have been anxieties and complaints from areas in my constituency. For instance, anxieties and complaints have been expressed in Lis-vane which is part of Cardiff and near the motorway. Similar anxieties and complaints have been expressed in the neighbourhood of Radyr, which is on the edge of Cardiff.

I hope that the right hon. Gentleman and his Department will do all that is possible to avoid the real problems created by large, heavy and disagreeable traffic being concentrated through the attractive residential areas to which I have referred. There are other areas that come within other constituencies on which I shall not comment. I know that the right hon. and learned Gentleman is well seized of the problem and I hope that he will consider it again.

I hope that the confidence for the future of the right hon. and learned Gentleman is well founded. Our anxieties are not made purely from a partisan or political point of view. We are anxious—rightly, I think—about the condition of the economy of Wales. We recognise the international and national setting in which it is cast. We do not ignore that but we feel that everything must be done, and considerably more than has been done, to give confidence to industry. Industry has a formidable task. Like the right hon. and learned Gentleman, I applaud those who are doing so much to expand and maintain their business under difficult conditions. I trust that the Government will give them every encouragement.

5.33 p.m.

Mr. Neil Kinnock (Bedwellty)

I follow the hon. Member for Barry (Sir R. Gower) in that he said that it may be the system that is the real trouble. I also follow him in saying that there is a necessity, given the sort of system that we have, to try to sponsor confidence in the business community. However, experience in that respect has been sad for Conservative Governments as well as Labour Governments, as the former Conservative Prime Minister, the right hon. Member for Sidcup (Mr. Heath), had occasion to say in an irritated fashion in 1972. The right hon. Gentleman said that the Conservative Government had done everything possible by releasing tax obligations, giving Keynesian assistance and encouraging and giving a fair wind to a competitive mixed economy, and that still industrial investment and production had not noticeably picked up. The Prime Minister of that time threw wide his arms and asked the business community what more could be done.

It is true to say that the system is the villain of this piece. It is a man-made system and, therefore, it must be within the capacity of man to correct it. We have to have the courage to identify the causes of our weakness and then to do a great deal to eradicate them.

Whether we are talking about the 81,000 unemployed in Wales, the low industrial production of Wales, the low industrial investment rate of Wales, or whether we are talking about similar difficulties throughout the whole of the United Kingdom and its 1½ million unemployed, among the primary causes of our difficulties is the fact that we have been encumbered, slowed down and distracted for years past—indeed, through every year since the war—by totally outdated and grandiose delusions and outdated responsibilities in both the military sector and the economic sector.

Continually foisted upon us has been the necessity of maintaining business confidence and international confidence not for reasons leading to the development of our economy, the development of industrial investment, the sponsorship of industrial employment and the improvement of living standards, but for the retention of capital in Britain. Although it has diminished, especially since my right hon. Friend's statement on 16th December 1976, our continuing rôle as an important world banker is a ridiculous, preposterous responsibility for a medium-sized economic and political power in the latter part of the twentieth century.

It is time that there was a consensus about the need to throw off such responsibilities, an acknowledgement that we shall never have a high-growth full-employment economy with a high standard of living as long as we try to retain these antediluvian, grandiose schemes for our rôle in the world economy and the world military structure.

When we turn our attention back to Wales to see the effect of bringing our economy to a juddering halt at various times since the war with the aim of trying to retain currency in Britain, and at other times with the aim of trying to attract currency. That was done in the knowledge that it was not here for hard industrial investment, merely to take advantage of the interest rates that the protection of sterling made us offer in order to try to sustain our rôle in the world. The effect has been not so much on London and the South-East as on the peripheral areas, on the regions, on the assisted areas such as Wales. Those are the areas where the instability that has been felt within the system because of the country's world financial rôle has multiplied itself. It has had the stronger reverberations on the more sensitive and less secure parts of our economy, such as Wales.

The hon. Member for Barry asked why that has not happened in Holland, France and Germany. I have no interest in taking refuge from reality but the fact is that none of those countries has had the international obligations that this country has chosen to accept and continue over the years. We have had continual fluctuation where they have had relative serenity. Where we have a continuing obligation to maintain a world financial rôle, they have been able to concentrate on the advancing prosperity of their own economies by more intelligent and generous investment strategies and by the sponsorship of employment and all the things that have gone with it.

If the Government are to show us the way out of the acute difficulty in which we now find ourselves, it must be through the recognition that our international financial rôle must go. We must appeal to the international economies to acknowledge that we are worth far more to them alive than dead. We should be able to rely on their assistance, generosity, funding and the immense fortunes that they still have at their disposal to see us out of those responsibilities.

Sir A. Meyer

No.

Mr. Kinnock

I know that the hon. Member for Flint, West (Sir A Meyer) does not believe anything of that sort. All I am saying is that we should withdraw from his pipe-dream of the Britain that he once knew. Surely that is in the interests of the 81,000 people in Wales who are unemployed, the thousands more who are not secure in their occupations and the thousands more who will be afflicted by the cuts that the Government have had to implement to try to safeguard the position of sterling.

Let us put the issue fairly and squarely to the people. Our refuge does not lie in the sponsorship of profit. If it did, we would have saved ourselves a great deal of trouble in past years when Conservative Governments tried to intervene with profit-oriented policies. But in the nature of our mature economy and our international responsibilities, and in view of the attractions to investment elsewhere in the EEC—and before it existed in the world market—even a Conservative Government could not breathe life into an ageing, senile capitalist system in Britain. Therefore, the refuge does not lie there—nor does it lie in the cuts that are now being experienced in the Welsh economy.

Wales is a country which, through no fault of its own—and because of no lack of inventiveness, no fear of hard work, or no lack of enterprise—simply has no indigenous large source of capital and is on the periphery of a great Western European market. Once its major resources lost the importance they once had in the world economy, there was no reason for Wales to be developed economically other than for the purpose of keeping the people there and of sustaining the community.

Profit cannot be very interested in Wales—and I do not blame it because that is in the nature of the system. As a consequence, Wales is afloat on public expenditure. The major source of development in Wales is to be found from public funds. Indeed, that is the major system of priming the pump. The only way in which Wales has a future is from public funds, simply because it can play no part at all in the general system which exercises the criterion of profit—[Interruption.] It is no use the Tory Whips grinning. Their knowledge of the system is the knowledge of ignoramuses. For many years Wales must depend on the willingness of the general public and the ability of the British Government to inject, sponsor and develop on the basis of public financing.

Mr. Wyn Roberts (Conway)

Will the hon. Gentleman explain from where those public funds and injections are to come?

Mr. Kinnock

They come from all the people who subscribe taxation—corporate, private, purchase and many other forms of taxation—to a central Exchequer.

Sir A. Meyer

What about the National Enterprise Board?

Mr. Kinnock

The hon. Member for Flint, West is beginning to crow about the contribution to the nationalised industries. My right hon. Friend the Secretary of State has just demonstrated that the only source of major large-scale industrial investment in Wales for many years has been the public industries. That has happened because the public industries, in addition to having an interest in profitability, obviously have an obligation to sustain a community standard and to have regard to a wider measure of public need than the mere creation of profit.

I remember the hon. Member for Flint, West in 1970 saying that what we needed was more Sloughs. Obviously the hon. Gentleman has not moved from that opinion. I wonder how loudly he says that to his electorate and what their response will be to that singularly depressing message that the battle is over in Wales, and that Wales can be starved of public assistance, public sponsorship, public funding and public investment—in other words, let Wales dry up and blow away. That is the attitude taken by anybody who wishes to adopt the criterion of profit in the development of the Welsh economy.

The Government's attitude to Britain's rôle in the world economy has made it necessary to bring about cuts in public expenditure to strengthen sterling. This has happened to such an extent that my right hon. Friend the Chancellor of the Exchequer in July 1976 proposed a cutback on regional employment premium to save £48 million, but by December last year it became necessary to abolish the premium to save £150 million in the current financial year and £170 million in the following year.

Nobody should make any mistake about the reason for destroying the REP. It was not the reason offered by my hon. Friend the Member for Swansea, West (Mr. Williams), who is a Minister and whose judgment I generally accept. The reason he gave on 31st January was that temporary employment subsidy gives a far more realistic form of assistance to firms that are really under pressure".—[Official Report, 31st January 1977; Vol. 925, c. 10.] That is not the point, nor is it the fact that we have, as the Prime Minister said, a new problem of unemployment. The reason that REP is being abolished lies in the public expenditure cuts. It has arisen because of the need, in the Government's view, to strengthen sterling. It is a little inconsistent for those whose major commitment in the business community is for that kind of strategy to win for Britain joy through pain, so that we can tighten our belts, put our shoulders to the wheel, put our noises to the grindstone, and all the rest of it, then to come to Parliament and say that if the cuts have resulted in the loss of the REP, that was not what was in their mind originally.

Certain realities must be acknowledged by the Opposition. The first reality is that the cuts have come about as a consequence of the economic orthodoxies preferred by the Opposition, with the result that Wales will suffer and will not be sheltered. I think that Wales should be sheltered. We have already lost £32 million. We cannot afford to lose another £20 million a year, which is the difference between the temporary employment subsidy and the total amount of REP that would have been paid. I do not think we can afford to lose even one farthing a year.

We should try to sustain the steady flow of REP, diminished in importance as it has been, as a means of sustaining industry, especially small firms, in Wales. In addition, we must have regard to the advantage given to the rest of the United Kingdom economy in the form of special assistance for the maintenance of manpower levels by the payment of temporary employment subsidy. There is no reason why we should not pursue both courses. That factor and the drain on public expenditure are not satisfactory.

Against that situation, the people of Wales stand to lose up to 10,000 jobs as a consequence of the revenue lost as a result of the abolition of REP. That is a major responsibility for the Government to take on. Indeed, if there had been an opportunity to vote against that change in policy in the Division Lobbies, I would have been willing to take that responsibility. We exchanged the constant injection of ready liquid sources of cash for industry in Wales for squirts of assistance which will disappear in the fortunate event of an upturn in the economy. Thousands of jobs in Wales are under threat.

There are particular problems and difficulties. I urge Ministers to look again at the necessity for a truly discriminatory form of industrial assistance —as the regional employment premium was. I urge Ministers to regard that as an essential, main part of policy, as a decisive factor in our attitude towards regional policy, and to realise that—whatever the general difficulty throughout the whole economy—these problems are more intractable, deeper-rooted and longer lasting in Wales and other such regions than they are in South-East England and the non-assisted areas. Therefore, even at a time of crisis and difficulty, additional margins of discriminatory allowances, assistance, subsidies and inducements must be sustained.

Obviously, I should like the Government to go further than that, and, in the name of public accountability, to implement Labour's manifesto undertaking. The Government should not allow this money to be just drawn out. The use of the money should be made subject to a much wider public scrutiny. The Government should energise and give much more power to the NEB and the Welsh Development Agency, and relieve them of the restrictive guidelines that mean that, frequently, they can give money only to firms that do not really need it. The Government should make these organisations real entrepreneurs on their own behalf and the public's behalf in the use of public money.

I hope that we shall see the reestablishment of the proudest part of our Labour policies that have been put to the people of Wales during the past years—on the lines of the policies of 1966 and the regional employment premium of 1968. We were then showing a real commitment to giving discriminatory assistance to Wales, to Welsh employment and the development of the Welsh economy. If we fail, the people of Wales will make a judgment that we shall deserve.

Several Hon. Members

rose—

Mr. Deputy Speaker (Sir Myer Galpern)

I remind hon. Members that the debate must finish at 7 o'clock and that the wind-up speeches are due to begin at 6.30 p.m. Several hon. Members, who have been here throughout the whole debate, are still anxious to take part and six-minute speeches would ensure that they will all have an opportunity to speak.

5.52 p.m.

Mr. Geraint Howells (Cardigan)

I have listened with interest to the debate so far and, with respect, I have heard little from the Government today that will boost confidence in an ailing Welsh economy, especially in the private sector. No mention has been made today of the construction industry, of the self-employed sector, of housing, or of the elderly who have, in their time, given a great deal to Wales.

Three long years have passed since the Secretary of State for Wales was appointed to his present post. Those three years have been an unprecedented loss of confidence in all sectors of the Welsh economy. It is not my intention to blame all this on the Welsh Office and the present Government, as I am fully aware that there are some external influences involved and that many other areas of Britain have been similarly affected.

But I am not convinced that enough positive action has been taken by the Government to remedy the situation. For example, while I applaud the decision to set up the Development Board for Rural Wales, I regard the money given to finance the Board as far too little when the tremendous ask that it has been allocated is taken into account. I have said on many occasions that if we are to stem depopulation in rural Wales—and especially in Mid-Wales—more money must be allocated to the Board within the next three years. The Board's chairman told us some time ago that he would have only a few thousand pounds in hand after engaging in improving the development at Newtown itself.

I have taken heed of what the Minister said, but agriculture is also suffering from under-investment. Production has gone down, despite the Government's famous paper "Food from our own Resources" and, unfortunately, consumption has also gone down. Industries allied to agriculture are suffering as a result of this recession. There has recently been a severe shortage of tractors, especially the smaller ones that are used on hill farms.

I was disappointed to note that the Government have not yet come out in favour of the British Agriculture Export Council—a body that has, on many occasions, given great service to British agriculture and has encouraged the expansion of British markets abroad. I should like to see a definite commitment made to this organisation to enable it to continue its work. Perhaps the Secretary of State would give—or at least consider giving—a separate grant to the Welsh Agriculture Export Council to assist the Welsh farmer to find overseas markets and thus encourage his productivity.

I wonder when the Minister will be having discussions with his counterparts in Europe and whether he will, in discussing the sheepmeat regulations, make sure that we retain the guarantee price system that now operates in this country. Will the Minister also give more consideration to something that is essential to the agricultural industry—the setting up of a land bank to help young people in agriculture in Wales. Their counter-parts in Europe receive bank loans at low interest rates of 4 per cent. to 6 per cent. compared with the higher rates that the young entrants to agriculture pay in this country.

I should also like to see tax reliefs. I wonder whether the Minister has given any thought to a tax relief over a period of three to five years—as in Australia to British agriculture. We are all willing to pay taxes because we are living in a welfare State. We are proud of what is given to every one of us in Wales today. But if we are to produce more from the land of this country—and that is essential—tax relief should be given to a farmer for three to five years so that he can invest in the land and produce more.

The burning issue in Wales at the moment is unemployment because there are over 80,000 unemployed. But there is also a housing shortage, and I have said on many occasions that the right priority for a young couple getting married is to look for a house and for work. We should do everything in our power to cater for the young and to make sure that they are employed and housed. Lack of housing and employment are two of the greatest problems facing the country today. I know so many unemployed in my own constituency who would gladly undertake any work rather than live on the dole.

The construction industry is in great difficulties, as we hear from reports this morning. Is there not some justification for channelling some of the money available in the job-creating programme into this sector, thus creating new jobs and houses at the same time? Can the Minister say why the housing problem should not be partly solved in this way? The Government should be able to solve our housing probems in Wales within three years if they give the right incentives to private enterprise and if they give an extra cash flow to local housing authorities to build at a much faster rate than at present.

I have pointed out before how much small businesses and the self-employed can contribute to the economy. Given the right encouragement—in other words, getting rid of some of the discriminatory taxes that are imposed on the selfemployed—these small businesses could expand and so employ more people. This would make a great difference to employment prospects in the area.

I understand that the West Wales Steel Development Committee has made representations to the British Steel Corporation and the Government to ask for a quick decision on expansion plans for the Port Talbot steelworks. Can the Minister tell us when that decision, which will have far-reaching consequences, will be taken?

As I have said before, once we have our own Parliament in Wales to look after the economic and other interests of Wales, we shall be on the right road to recovery.

6.0 p.m.

Mr. Jeffrey Thomas (Abertillery)

I am conscious of the pressures of time and will try to be brief. I hope that the hon. Member for Cardigan (Mr. Howells) will forgive me if I do not follow the themes of his speech.

I wish to deal first with industrial development certificates. The restriction of IDCs is vital to the future of the economy in Wales and I cannot help feeling that there has been an erosion in the Government's commitment to IDC policy. Unhappily, successive Governments have been guarded in making known the guidelines on which the policy of the day operates. I say to the Government that they cannot do by stealth what they cannot or will not do by edict.

A recent study of regional policy showed that IDC policy was responsible for an average of 45 firms annually moving to development areas between 1960 and 1971. The granting of IDCs is at the discretion of the Department of Industry and there is growing disquiet in development areas for in 1975 more than 400 IDCs, involving 1,300,000 sq ft of space, were granted in the South-East. It is profoundly disturbing that it has become much easier to obtain IDCs in recent years. This is a trend that must be halted.

It is essential to forge a cogent policy on the restriction and distribution of IDCs. Some years ago, the Hunt Committee reported that a comprehensive Department of Trade inquiry showed that at least one firm in five that moved to development areas did so, to a great extent, because it had been refused an IDC elsewhere. With the background of difficulties that we are encountering in Wales, it is clear that there must be a stringent curtailment of certificates in the richer areas of Great Britain.

Will the Government agree that unemployment figures should be the major factor to be taken into account in the consideration of IDC applications? Will they define the general criteria which determine the Department of Trade's attitude to a particular area of the country in relation to IDCs?

I hope that we can at least have some reassurance from the Government and a clear statement of policy on a matter which is of paramount importance in attracting industry to Wales.

On steel, I thank the Secretary of State and the Welsh Office for the truly magnificent efforts that they are making in Ebbw Vale and North Gwent. However, in September, 700 men are to be made redundant and this pattern will be repeated early next year.

I welcome the fact that Sir Charles Villiers, the Chairman of the British Steel Corporation, is taking over as Chairman of BSC Industry Ltd., for which Ebbw Vale is a test case. BSC Industry is not just an experiment in social responsibility that deserves to pay off. We in North Gwent look to the BSC, acting with the Government, the Welsh Development Agency and the local authority to ensure that alternative jobs are created to coincide with the job loss of 2,000 scheduled over the next 18 months.

It is crucial that the Government and the BSC should look again at the timetable of the rundown at Ebbw Vale in relation to redundancies. The alternative is unemployment on a scale that could not be tolerated.

I was pleased that the Secretary of State referred to the coal industry in his speech. As the Chairman of the NCB pointed out in December, the energy crisis has resulted in, if nothing else, a clear demonstration of coal's vast reserve potential and its capacity to provide a competitive and secure source of energy. International energy experts are now generally agreed that the world demand for coal may easily double between now and the end of the century.

Looking beyond the 1980s, when North Sea oil and gas are likely to be in decline, there will be an increasingly important rôle for coal. Recoverable reserves are now thought to amount to 45 billion tons, equivalent to 300 years' supply at the present output of 125 million tons a year. The Secretary of State mentioned "Plan for Coal" which is the industry's scheme for development up to 1985. That is well on target and the NCB and the unions have now turned their attention to longer-term strategies by agreeing Plan 2000, a blueprint for expansion to the end of the century. I was delighted that the Secretary of State made some encouraging noises about the Government's attitude to the Board's plan for coal. It is obvious that it will not fall victim of public expenditure cuts.

Last year, the Board embarked on the biggest coal exploration programme carried out in Britain since the nineteenth century. Spending has risen to 14 times the level of a few years ago on a programme of exploration and seismic surveys. Wales is well poised to take advantage of this new climate. Workable reserves in the South Wales coalfields total at least 2,000 million tons and, in addition, there is an estimated 3,000 million tons of workable coal in unproved or partly proved areas of the coalfield. At the present rate of output, that is enough for 100 years' consumption initially and possibly 150 years thereafter. In Wales, we have every cause to be optimistic for the future.

We believe that these opportunities for coal in Wales are exciting and far-reaching, certainly in my constituency where two collieries have outstripped their production records of the past 12 months. We believe that both sides of the industry will want to seize these opportunities. No worker in Britain has given more to the country than the Welsh miner and there is no doubt that the Government are resolved to give the coal industry all the support that it needs.

6.9 p.m.

Mr. Dafydd Wigley (Caernarvon)

I shall not follow the hon. and learned Member for Abertillery (Mr. Thomas) except to say that he referred to "encouraging noises" from the Secretary of State, but unfortunately we have heard the same encouraging noises for three years but no action. We need some encouraging policies and results from such noises.

We face a tragic economic situation in Wales and this short debate should concentrate on the Government's strategy in developing the economy of Wales. I listened to the Secretary of State with interest when he argued that 22,000 jobs would be coming to Wales as a result of the temporary employment subsidy, the job creation scheme and the work experience scheme, but these projects are not the answer to our problems. They are palliatives and, although they may be welcome in themselves, they are transitory and do not even replace the value of regional employment premium that we have lost.

The Secretary of State also mentioned Section 7 assistance and the benefits coming therefrom. But Section 7 assistance is no substitute for the regional employment premium. Both were in existence before. We would have expected an on-going programme under Section 7 in any case.

But under Section 8 of the Industry Act 1972 we find a far from satisfactory situation. Of 507 applications under Section 8 in Great Britain, only 12 were in Wales, and of the £48 million offered in assistance, only £300,000 was in Wales. The accelerated projects scheme situation is also dismal. In Great Britain, there have been 119 such schemes, worth £84 million, but only two of them have been in Wales, worth £2½ million.

The situation is not good enough. The palliative schemes are merely transitory. Most of them were announced before the regional employment premium cut in order to help with the existing unemployment situation, and if we are to make inroads into the economic problems facing Wales the case for the regional employment premium differential in attracting industry into Wales is overwhelming. The loss of REP has been a loss for the manufacturing industry sector. Schemes such as the temporary employment subsidy are not confined to the manufacturing sector and some are not applicable to it in any way.

The Government say that an additional £200 million would have been needed to bring the regional employment premium back up to the 7 per cent. level. But industry in Wales cannot afford the loss of an equivalent sum—as much as £32 million in Wales in terms of REP. There was no reason to chop it out completely, and the cut will have a serious effect. It is regrettable that the Prime Minister should have said on 20th January that the premium was of little significance. It is of particular significance in an area where trading margins are tight, which is the situation in Wales, where we have so many branch factories, who are the first to feel any recession.

The CBI has completed a survey of the effects on firms in Wales of ending REP. Out of 208 respondents, no fewer than 68 expressed concern at the withdrawal of the REP, and 140 expressed serious concern. There will be cash-flow problems as a result of the withdrawal, according to 115 of the firms surveyed. Asked whether redundancies might be created by the loss, 51 firms said "Yes" while 15 more said that this would possibly happen. On the question whether expansion plans could be deferred, 82 firms said that there would be a deferral. That is the tragic effect on industry in Wales of the withdrawal of REP. Some of these companies will be seeking greater flexibility in the Price Code to allow them to recoup some of the margin they have lost. They must do so in order to keep viable.

It is regrettable that the decision was taken so quickly. How can companies plan ahead in their investment programmes in such circumstances? How can we expect companies to take any notice of Government incentive programmes if, at the drop of a hat, those programmes can be scrubbed overnight? This situation brings a message home to us all. Two days before the Chancellor of the Exchequer's announcement of the withdrawal of REP, the Under-Secretary of State for Industry said: As I recall, the Conservative Government were going to abolish REP completely. We retained it and have made it fairer as between men and women. We have had no evidence that it has had any deleterious effect. Our evidence so far is that REP is still a welcome inducement to investment and the maintenance of employment in the assisted areas."—[Official Report, 13th December 1976; Vol. 921, c. 959.] How can we expect companies considering investment to take Government policy seriously when that sort of thing is said in the House only two days before the Chancellor announces withdrawal of the assistance?

The regional employment premium was an incentive in attracting jobs, and a vital factor in retaining jobs. It was particularly relevant in Wales because it helped the labour-intensive industries. So much of the rest of the armoury of regional policy is geared to capital intensive industries. The REP was a balancing factor, as the Welsh Council pointed out to the Conservative Government when they were considering the future of REP in 1972.

The premium was imaginative in many ways in creating, in effect a regional devaluation within a unitary State. There were great benefits from this when different areas needed different regulators. It was, contrary to what the Government say, a selective weapon. It was geared to bringing labour intensive industries to areas where work needed to be created. The abandonment of REP appears to have been a sacrificial lamb to placate the money-lenders of the IMF when the pound was in trouble. Wales has been taken to the altar to allow investment to go ahead in inner city areas—a political decision.

It appears that, for the £32 million being lost in REP, Wales is getting only about one-tenth back in new additional assistance, and companies with acute cash-flow problems as a result of inflation and high interest rates will face problems of redundancy as a result.

This is a question of co-ordinating planning inducements for industry in Wales. We vitally need a strategy for Wales. We need economic planning. As pointed out in the book Overseas Investment in Wales, by Professor Glyn Davies and Dr. Ian Thomas, Any plans for development—whether by the Welsh Development Agency, by the local authorities concerned to implement or to update their own structure plans, by the Rural Development Board, or by major private businesses themselves—require here and now a comprehensive economic plan for Wales as a whole, within which their own plans can properly be fitted. Demand for such a plan is growing within Wales to such an extent that it appears incredible that a positive and affirmative answer can be much longer denied. In the context of the work of the Welsh Development Agency, it was the responsibility of the Agency to put forward a statement of policy and programmes to the Secretary of State. I understand that its statement has been before him since the beginning of January. Has he approved it, or has he made substantial amendments to it? Will there be a chance for hon. Members to debate the strategy?

We need a strategy of economic policy. But, as shown in cases like the REP, the Government have a vacuum in terms of economic development policy for Wales, and it is little wonder that we are in a mess.

6.18 p.m.

Mr. Donald Anderson (Swansea, East)

Fundamental to the employment problem of Great Britain as a whole is the fact that we need to create more jobs, in part because of demographic pressures, with more people coming on to the labour market at a time when, for various reasons, it is becoming more difficult to create jobs. This dilemma is becoming particularly acute in Wales because we are facing more competition from other areas, formerly areas which were favoured in employment terms—the South-East and London. Thus we have pressures, which my hon. and learned Friend the Member for Abertillery (Mr. Thomas) described, to reduce the effectiveness of the IDC policy, which could have a bad effect on us in Wales.

I want to speak of the construction industry in Wales. The National Federation of Building Trades Employers carried out a survey among its member companies, and it found that 70 per cent. of them had a drop in inquiries for new work in the autumn, that more than half of them are working at two-thirds capacity, and that over 75 per cent. of them expect this year to be worse than last. That is the picture for the United Kingdom as a whole. It is mirrored locally by the Swansea Association of Building Trades Employers and the relevant trade union, UCATT.

It is clear, in looking at the unemployment profile in Wales, that construction workers account for about 25 per cent. of the total jobless. That is in absolute terms, and, as a proportion, it has every chance of worsening as a result not only of the July cuts, but, in particular, of the December cuts. In my area, some members of the local building employers' association are talking of reducing their labour force this year by as much as 50 per cent. It is estimated that, in the current year, in Wales as a whole there may be as few as 10,000 housing starts. One of the effects of the reduction in orders is the increase in overall costs. I was told, for example, that the success rate of tenders in the recent past was possibly one in eight, whereas it is now one in 40. One can imagine the amount of work involved in the preparation of tenders, which adds considerably to the overheads of such companies.

It is offensive in social terms to see skilled men laid off when there is such a substantial need in Wales for tackling the problems of old and decaying housing. Surely it is not beyond the wit of Government to put together the two sides of the equation—the need for work and the desperate need for housing. What thought has been given to that by the Welsh Office? I know that one cannot divorce Wales from the national constraints on public expenditure but what thought has been given to the delays in planning proposals which are currently causing so much concern within the building industry? The divided responsibility between various authorities which now exists often leads to delay.

It has been reported today that at Wednesday's meeting of the National Economic Development Council the Government gave a wholly negative response to the demands of the industry for separate assistance. We are told that a sympathetic line has been taken but that no action is planned and that the industry should sweat itself out of the crisis.

As a result of the blows which the construction industry has suffered over the past few years, and which it expects to suffer in the next few years particularly because of the September cuts, the decline in the industry has resulted in the working in it becoming dispirited. Those employed in that industry are now moving into more secure industries or are becoming unemployed. The decline has gone too far and demand may quickly exceed supply when and if the upturn comes. What work have the Government done to solve this problem?

Clearly one effect of a hoped for early decision on the massive investment in Port Talbot will be consequential and beneficial to the construction industry over a substantial part of South Wales. That is an additional reason for an early and favourable decision on the Port Talbot investment.

6.23 p.m.

Mr. Ian Grist (Cardiff, North)

Today we have been discussing matters which concern the people of Wales instead of the wasted effort, time and energy which has taken up the time of the House for the last few weeks. We must recognise that Wales is part and parcel of the United Kingdom economy, as it is part of the European and world economy. Any increase in jobs, which is what we are primarily after, is dependent on the recovery of our national economy and a recovery in investment intentions. Those have been severely damaged by Government actions in the last three years. They are not helped by the Bullock Report, by the latest price control proposals, by the abrupt withdrawal of REP or by the bias against the self-employed.

In Wales we have two specific major industries which have already been mentioned in the debate—steel and coal. Apart from the individual closure problems that exist in the steel industry, I am concerned that the European steel industry and the Western steel industry as a whole has over expanded in the face of competition from the Third World and other steel producing countries. I am worried that there will be further massive lay-offs which are not planned.

I am surprised that hon. Members have not yet mentioned the proposed early retirement scheme for miners. That will cut the numbers employed in the coal industry in South Wales by 5,000 in the next three years. Where will the new skilled manpower come from to make up that loss?

What help is the Government to give to increase incentives for people to go into the mining industry? What are they doing to support the productivity bonus scheme which the NCB has proposed at a time when increased productivity is needed? Unless coal remains competitive with oil we must expect further redundancies and that fuel prices will leap upwards. With oil coming on tap in considerable quantities it is essential that coal productivity should increase because the South Wales coal industry cannot sustain a price-cutting situation.

In Cardiff we have a particular plea to make to the Minister. There seems to be a misunderstanding that Cardiff is stronger economically than it is. The Government do not understand the problems of Cardiff. For instance, male unemployment in South Glamorgan is at 8.3 per cent. and is mid-way between that for Shotton and Ebbw Vale. In the southern part of the city unemployment is comparable with anywhere in Wales. In my own division we have an enormous advance factory at Pentwyn which was announced under the last Conservative Administration and which was finished nearly two years ago. We are still waiting for a tenant. The Minister must tell the House what has happened to this factory and when we may have an announcement about it.

We have a completely unbalanced economy in South Glamorgan with only 22 per cent. of the workforce employed in manufacturing industry compared with 35 per cent. nationally. Yet if there is a closure at the East Moors steel works that imbalance will grow. Although we have this unemployment and low manufacturing base there is a serious shortage—as GKN has found—of skilled craftsmen in the engineering and electrical trades. The construction industry will also find that there is a similar shortage if there is a pick-up in construction demand. I accept that the Government cannot do everything—and heaven forbid that they should try—but they can help and they can hinder.

We ask that the Government look at their plans for the M4 motorway. There is a real danger that this will turn into a gigantic Cardiff by-pass. There is a danger that all it will achieve is to take transport past Cardiff. It is designed to do that but we must have more access roads so that some of the traffic can stop in the Cardiff area. This will be the only motorway in the country which passes a major city and which has only two access roads to serve it. The further the M4 proceeds the greater the emphasis which will swing to the A55. The danger is that this vital aspect of the M4 construction will be overlooked.

We need more industrial sites in South Glamorgan. I do not want to touch on the row about the inquiry over the Wentloog site. But what are the Government doing to further the application to the ECSC for assistance for the Tremorfa foreshore site which involves 250 acres being prepared by the British Steel Corporation and the Cardiff City Council?

If the Government are not in the end prepared to support industry, profits and enterprise—if they are not going to live up to the words that they have spoken from the Prime Minister downwards in the last few weeks and months—they should get out of office and make way for those who are. If they can live up to their words, we would accept that it is only by those virtues that the Welsh economy and, through it, the national economy can truly recover.

6.31 p.m.

Mr. Wyn Roberts (Conway)

In this short debate the grim facts of life in Wales have spoken for themselves. We have become so used to hearing them now that we are in danger of becoming insensitive to the reality behind them. I find statistics a form of anaesthetic. They dull our finer feelings and it takes the desperate plight of an individual, described in a letter or outlined in a surgery, to prick our consciences and bring home to us the intense misery of the economic situation over which the Government preside.

The Secretary of State should have appeared before us in sackcloth and ashes, but he is not even here and has not been here for a considerable part of the debate.

Hon. Members

Disgraceful.

Mr. Deputy Speaker

Order. Perhaps the right hon. and learned Gentleman has gone away to get the sackcloth and ashes.

Mr. Roberts

The Secretary of State came here for a short time to talk to us about a turning point on the horizon. We have heard about turning points before. They have been turning points for the worst.

It is sometimes said that, because the levels of social security benefits are such as they are, unemployment is more tolerable and means less hardship than it used to mean. That is dangerous thinking. It leads to what we now see developing—namely, a kind of social ostracism of the unemployed in some parts of Wales. We hear people say of those without work, especially in rural area, that it is due not so much to the fact that they cannot get work as to the fact that they do not really want it. Too often that is said without any real justification.

One can imagine the damaging psychological effect of that kind of statement on the individual without work, especially the young who have left school eagerly looking forward to their first job and a new life, only to find that there is nothing for them. There may be some who are better off on the dole than at work. But that is a condemnation of the system, not the individual. The vast majority would prefer to be in work than out of work.

I shall dwell briefly on another personal aspect of current high unemployment in Wales, because I think that we all need an antidote to the impersonal statistical approach. I have here a letter from a young constituent—a girl of nineteen—who has been trying to get a job as a typist for the last two years and cannot get one, she writes, because I cannot speak Welsh. Many people like myself cannot get work because of not being able to speak Welsh. I had to reply to her that I also knew a number of young Welsh-speaking girls who could not get jobs either.

I mention that case because it is indicative of the erratic reasoning which thrives in a situation of high unemployment. Curiously, the real reason why the non-Welsh-speaking young lady and the Welsh-speaking young ladies to whom I referred could not get jobs was the same—the cutback in local government spending. The one clear lesson is that unemployment can divide society along unexpected and unwelcome lines and that the utmost care must be taken to allocate jobs fairly and to give the correct explanations if jobs are not available.

I come now to what the Government euphemistically call their strategy. Never was there such a blatant contrast between the grand scale of Government efforts at promoting the economy and the actual dimension of the problems facing us. Any sane man looking at this contrast would be bound to conclude that there was something radically wrong with a system which had maximum Government effort working in one direction and maximum drift in the opposite direction actually taking place.

The Government cannot argue that their efforts are to match the adverse economic situation as they found it, because they have been in office for three years, they have been taking measures for three years, and the economic situation has been deteriorating continuously for three years. The present situation is of their making. Even they must be realising now that their thinking is at fault and that their strategy lacks some fundamental ingredient necessary to success.

If the Government want me to go back to their inheritance and compare the levels of unemployment and inflation that they inherited in February 1974 with the levels that we have now, I shall do so. But the Under-Secretary of State is silent for once, so we may take it that the Government accept responsibility for what has happened during their term of office. That is a welcome advance. It is the first acknowledgement that we have had.

The situation is so serious that it would be unforgivable not to try to help this hopeless, hapless Government, and I shall do my best in that direction.

First, it seems to me that the Government's left hand does not know what the right hand is doing. Reference has been made to the quick ending, the guillotining, of the regional employment premium. Time and again, we have been told that the premium means very little as an incentive to employers to employ. The Secretary of State said that again today. In all, as we have heard, it amounts to £32 million annually in Wales alone. That is now to be taken out of the Welsh economy. Of course, that cannot be considered in isolation. It must be considered in conjunction with the increase in the employers' national insurance contribution. That will take a further £60 million out of the Welsh economy. In the simplest possible terms, the Government have made it more costly to employ people in Wales.

The Secretary of State may talk about more money being made available to the Welsh Development Agency. But we are bound to ask: at whose expense? It is at the expense of the private sector, those who are already providing employment, and it makes it more difficult for them to maintain their current levels of employment and to expand.

What is the reasoning behind this absurd transfer of resources? Is it simply a political cosmetic—a device to enable the Government to appear to be doing something? It may be, as I said earlier, that the Government's left hand does not know what the right hand is doing.

The increase in employers' contributions is what we might call British national policy while the cancellation of REP and the increase in funds available to the Welsh Development Agency are part of regional policy. Yet all these policies were announced by the Chancellor. But it would not be the first time that he has taken with one hand and given some, but by no means all, back with the other.

The truth is that, as we all suspect and as the hon. Member for Bedwellty (Mr. Kinnock) pointed out, in the course of the transfer of these resources some money is lost to. Wales. We may well ask whether the increase in Welsh Development Agency funds is at the expense of existing Welsh industry and probably available only from the cancellation of the regional employment premium. We are entitled to know the arithmetic, and we have not had it so far in the debate.

We know from the Government's expenditure plans, in Command Paper No. 6721 that in 1977–78 the United Kingdom regional support and regeneration budget is reduced from £743 million in the current year to £475 million next year. Every major item of expenditure in Wales which is under the Secretary of State's responsibility is considerably reduced, with the exception of trade, industry and employment. The Government are juggling with figures and are hoping that the cancellation of one item of assistance and the consequent unpopularity will be outweighed by a positive move in another more Socialist direction. What a cynical, irresponsible attitude this juggling reveals!

The juggling might be justifiable if the money were to be used to a greater effect to reduce unemployment, but that is open to question. Its first use will be to create a bureaucracy. We have a Government of political opportunists, desperately anxious for some whiff of political kudos as a result of their economic machinations, and yet they fail. They fail themselves and the country.

There was an interesting regional review, entirely devoted to Wales, in the Estates Times last week. It made better reading than the last Welsh Office quarterly Economic Bulletin. The Estates Times said: There is a potentially baffling array of agencies trying to attract jobs to Wales; both central and local government as well as promotions by manufacturers and traders. This causes wasteful duplication and sometimes unedifying competition between counties and, with severe restriction on local government spending, this duplication is even less acceptable. What worries me is that one has a distinct feeling that there is some substance in that charge of "a baffing array of agencies". Do we take enough care of those manufacturers and business men who come to Wales and try to provide jobs? Is too much emphasis being laid on the more obvious attractions of development in Wales and the business of attracting industry to Wales at the cost of care at a later stage?

I say this because I have encountered a few too many dissatisfied manufacturers who do not regard themselves as being properly dealt with by Government agencies and local authorities when they have established themselves here. There is an enormous job to be done in Wales. The Development Corporation estimates that we need 120,000 new jobs in the next 10 years—half of them to bring unemployment down to 2 per cent., another 30,000 to replace those lost in steel and coal and the remainder in manufacturing.

The problem, as the hon. and learned Member for Abertillery pointed out, is to create the new jobs in time. It is the problem on Deeside, in Cardiff and South-East Wales. We feel that the Government are losing this race against time. Can one wonder at that when the Government have been dabbling with the Scotland and Wales Bill instead of concentrating on the proper economic priorities? One suspects—and I have never been afraid of saying this—that their devolution policy was, they imagined, a political insurance against that failure to create the right climate for new jobs. If so, that policy is now bankrupt and the business of creating worthwhile jobs is reasserting itself as the prime necessity for the people of Wales.

The real requirement is for political courage, the courage to take the right commercial decisions, although they may be politically hurtful in the short term. The Government have never seemed to be able to grasp this point. Even in agriculture their decisions are short term and inevitably detrimental to farming and the country as a whole in the long term. Similarly, in steel they have been as dilatory as possible. Even the right hon. and learned Gentleman's constituency is threatened by lack of investment. He told us only half or less than half the true story.

There is also a lack of directness in the Government's policies. It is not enough to build advance factories. There must be tenants and they will come, whatever incentives are provided, only if the business they intend to engage in is worth while and if they have a chance of making a reasonable profit and of keeping a reasonable share of that profit. People will not invest and work for the Government to get the biggest share of the benefit.

In Wales we are looking for a change of heart and mind on the part of the Government. There are signs that such a change is taking place in the attitude of the Prime Minister. It is not surprising since the Conservative document "The Right Approach" has clearly become his bedside reading.

How long must we wait for a similar conversion of the Secretary of State? Heaven only knows. I believe that he has gone too far along the interventionist road to convert or to turn back. I shall adapt his own verdict on the Conservative Government, delivered on 23rd October 1971, by saying to him with far greater justification that the people of Wales know that the Labour Government are synonymous with unemployment, and they will not forget it.

6.47 p.m.

The Under-Secretary of State for Wales (Mr. Alec Jones)

I begin by expressing my regrets at the absence of the hon. Members for Cardiff, North-West (Mr. Roberts) and Carmarthen (Mr. Evans) although doubtless their absence makes my task of replying to the debate a little easier. The Secretary of State has had to go to another meeting. It was not possible to cancel it, despite our attempts, because of the short notice of the debate. I do not blame anyone, but it is a fact. Certainly hon. Members have not muted their criticism, but I would have had it no other way. If the hon. Member for Conway (Mr. Roberts) thought that I was silent for once, the silence was only a temporary lapse until I had the opportunity to speak.

It seems right and proper that we should use this opportunity and this Chamber to examine the problems confronting us in Wales. If we are to overcome our problems, which is the aim of all hon. Members, it is right that the problems, the Government's policies and the economic instruments that we have used should be subjected to the examination and criticisms of hon. Members this afternoon. I find it a little easier to accept the criticisms from some hon. Members than from others.

I have sat on this side of the House since 1974 and I have heard hon. Gentlemen opposite repeat ad nauseam that the cause of our ailments was the level of public expenditure. If only we had reduced this to the bone, all our problems would be solved, they have said. I noted the points made by the hon. Member for Pembroke (Mr. Edwards). He suggested a change in status for the North-East and the Milford Haven area. That would involve an increase in public expenditure. He said that we should stop shilly-shallying over Port Talbot as that would increase public expenditure. I was not sure whether the hon. Member was for or against Shotton, but if he was for it, that would mean an increase in public expenditure.

On the problem of the coal burn at Carmarthen Bay, he suggested that there should be adjustments to the price structure. That would involve an increase in public expenditure. His attitude to REP involved an increase in public expenditure. Almost without exception he called for increased public expenditure when his party has consistently said that the levels of public expenditure have been one of the main causes of our problems. The hon. Member for Conway repeated that.

What the Opposition have said on the question of regional employment premium was quite staggering, for in 1970 one of the first actions that they took on coming to office was to end investment grants and, by so doing, reduce to one-third the number of industrial development certificates in Wales. They soon became aware of what they had done, for in the Industry Act 1972 they were forced to return to a system similar to REP.

My hon. Friend the Member for Bed-wellty (Mr. Kinnock) suggested that the withdrawal of regional employment premium would lead to a job loss of 10,000. In the Government's judgment, the job loss resulting from the withdrawal of REP, coupled with the other measures announced by the Chancellor of the Exchequer on the same day, would be more than offset by the additional employment resulting from the measures to reduce unemployment and the additional expenditure on incentives to promote investment. Therefore, the net effect of the Government's package will be to reduce unemployment during 1977.

If my hon. Friend proposes to continue to use the figure of 10,000, I should much appreciate it if he would spell it out in more detail, but not now. In the Government's view, his figure is hopelessly wrong and represents the reverse of what will happen. However, I accept that there may be a problem about the speedy withdrawal of regional employment premium, but the fact that it is paid quarterly will give companies a breathing space of three months in which to review the situation. I say to firms in Wales that wish to revise their corporate plans that if any problems arise I trust that they will get in touch with my Department.

No one disputes the figures which the hon. Member for Pembroke gave, and no one takes any comfort from the level of unemployment, but he was less than honest when he suggested that only the Labour Government were at fault, because unemployment is excessively high throughout Europe. Countries on the Continent are dealing with the problem in different ways. The German and Swiss Governments are proposing to send back foreign nationals from their countries.

Because the unemployment situation is of concern for all EEC countries, it was announced in the middle of last month that the European Commission intended to draft a significant and comprehensive policy document during the following six months spelling out a strategy for tackling the unemployment problem throughout the Common Market. There is therefore evidence from Governments other than the British Government that unemployment is a problem in other countries and that the EEC is aware that it needs to be tackled.

The hon. Member for Caernarvon (Mr. Wigley) referred to the Welsh Development Agency and its strategy. He is aware, I think, that the Agency has not yet submitted to my right hon. Friend its strategy, which is the one referred to in the guidelines on industrial investment functions. However, it has sent to my right hon. Friend a copy of its draft statement of policies and programmes. My right hon. Friend is now considering it, but when and in what form the document will be published is a matter for the Agency.

The hon. Member for Barry (Sir R. Gower)—who has apologised for his absence, which I well understand—drew attention to the problem of small firms. It is fair to say that the Government have taken certain action to assist small firms—for example, tax concessions on stock appreciation and capital transfer. Secondly, to help small firms, a counselling service was set up as a pilot scheme in the South-West to make outside professional advice available to them, and, if successful, it will be applied elsewhere in Britain. We are making a study of management training needs of small firms. Assistance is available to small firms to make joint services available, such as accounting and marketing. Therefore, the Government are fully aware of the importance of small firms and are taking steps to try to make it easier for them to fulfil their rôle.

The hon. Member for Pembroke talked about the Carmarthen Bay power station and expressed concern, which we have heard from many quarters and well understand, about the future of the power station. This concern has been presented to us in the form of a joint submission by the Dyfed County Council and other local interests. The CEGB has given us an assurance that the four generating sets remaining in operation at the station will be available until at least 1980–81, but their operation will depend on the requirements of the national merit order working.

That issue and the question of coal stocks and coal burn at the Aberthaw power station are under current discussion by the working party, which held its second meeting last week. At that meeting there was the local union representative from the Carmarthen Bay power station to make sure that the working party did not ignore the problems affecting the power station.

The hon. Member for Cardigan (Mr. Howells) and others raised the question of Port Talbot and Shotton. We understand that the British Steel Corporation is nearing the end of its examination and will very shortly be submitting its conclusions to the Secretary of State for Industry. I am sorry that I cannot define "very shortly", but I think that one should read it fairly literally.

The hon. Member for Pembroke suggested that there had been considerable shilly-shallying by the Government on the question of Shotton. Had the policies of the Conservative Government been implemented, there would not have been a Shotton to shilly-shally about and the hon. Gentleman might not have received the support which he has received from the hon. Member for Flint, West (Sir A. Meyer).

The hon. Member for Pembroke also raised the question of development area status for the North-East. We are aware of this problem. It is being actively considered and discussed by the Department of Industry. The Secretary of State for Industry, myself and a number of other Ministers recently received from the North-East a deputation which drew attention to the problems.

The hon. Member for Cardigan probably did not hear my right hon. and learned Friend the Secretary of State say that he would be going to the Council of Ministers meeting in Brussels on 14th and 15th March to participate in the discussions.

Several hon. Members have mentioned the construction industry. The Government are currently considering suggestions which have been made to them by the economic development committees for building and civil engineering to ease the problems of the industry. Nevertheless, we should not ignore the practical steps which the Government have taken,

Question accordingly negatived.

including the spending of £50 million on the M4 this year, with a likely £48 million to be spent next year.

Despite all the criticisms about housing which have been made, we are spending more on housing than was spent by the Conservative Government and are building more houses in Wales. This is of help to the construction industry.

Most hon. Members have agreed that there can be a thriving Welsh economy only—

Mr. D. E. Thomas (Merioneth)

rose in his place and claimed to move, That the Question be now put.

Question, That the Question be now put, put and agreed to.

Question put accordingly, That this House do now adjourn:—

The House divided: Ayes 13, Noes 100.

Division No. 83.]	AYES	[6.59 p.m.
Grimond, Rt Hon J.	Rodgers, Sir John (Sevenoaks)	Wigley, Dafydd
Johnston, Russell (Inverness)	Ross, Stephen (Isle of Wight)
Marten, Neil	Stanbrook, Ivor	TELLERS FOR THE AYES:
Pardoe, John	Steel, Rt Hon David	Mr. D. E. Thomas and
Penhaligon, David	Thorpe, Rt Hon Jeremy (N Devon)	Mr. Geraint Howells.
Rees-Davies, W. R.	Wainwright, Richard (Colne V)

NOES
Anderson, Donald	Faulds, Andrew	Perry, Ernest
Armstrong, Ernest	Foot, Rt Hon Michael	Prescott, John
Barnett, Rt Hon Joel (Heywood)	Garrett, John (Norwich S)	Radice, Giles
Bates, Alf	George, Bruce	Rees, Rt Hon Merlyn (Leeds S)
Benn, Rt Hon Anthony Wedgwood	Gould, Bryan	Richardson, Miss Jo
Bidwell, Sydney	Grant, George (Morpeth)	Roderick, Caerwyn
Bishop, E. S.	Hamilton, W. W. (Central Fife)	Rowlands, Ted
Blenkinsop, Arthur	Harrison, Walter (Wakefield)	Selby, Harry
Booth, Rt Hon Albert	Heffer, Eric S.	Silkin, Rt Hon John (Deptford)
Brown, Ronald (Hackney S)	Horam, John	Silverman, Julius
Buchan, Norman	Hughes, Rt Hon C. (Anglesey)	Skinner, Dennis
Canavan, Dennis	Hughes, Robert (Aberdeen N)	Small, William
Carmichael, Neil	Hughes, Roy (Newport)	Smith, John (N Lanarkshire)
Cartwright, John	Hunter, Adam	Spearing, Nigel
Cocks, Rt Hon Michael	John, Brynmor	Stallard, A. W.
Cohen, Stanley	Johnson, James (Hull West)	Stewart, Rt Hon M. (Fulham)
Coleman, Donald	Jones, Alec (Rhondda)	Stoddart, David
Concannon, J. D.	Jones, Barry (East Flint)	Taylor, Mrs Ann (Bolton W)
Cowans, Harry	Jones, Dan (Burnley)	Thomas, Jeffrey (Abertillery)
Cox, Thomas (Tooting)	Kerr, Russell	Tinn, James
Cunningham, G. (Islington S)	Kinnock, Neil	Wainwright, Edwin (Dearne V)
Davies, Bryan (Enfield N)	Lamond, James	Walker, Harold (Doncaster)
Deakins, Eric	Lewis, Ron (Carlisle)	Watkins, David
de Freitas, Rt Hon Sir Geoffrey	Litterick, Tom	White, Frank R. (Bury)
Doig, Peter	McDonald, Dr Oonagh	Whitehead, Phillip
Dormand, J. D.	McGuire, Michael (Ince)	Whitlock, William
Dunnett, Jack	McNamara, Kevin	Williams, Rt Hon Alan (Swansea W)
Eadie, Alex	Marks, Kenneth	Williams, Rt Hon Shirley (Hertford)
Ellis, John (Brigg & Scun)	Meacher, Michael	Williams, Sir Thomas (Warrington)
Ellis, Tom (Wrexham)	Millan, Rt Hon Bruce	Wise, Mrs Audrey
English, Michael	Morris, Alfred (Wythenshawe)
Ennals, David	Morris, Rt Hon J. (Aberavon)	TELLERS FOR THE NOES:
Evans, Fred (Caerphilly)	Orme, Rt Hon Stanley	Mr. Peter Snape and
Evans, Ioan (Aberdare)	Parker, John	Mr. Ted Graham.
Ewing, Harry (Stirling)	Pavitt, Laurie