Second Speech Wales Bill Remaining Stages

We should be using this Bill to empower the Welsh Government—with an arsenal of powers to enable them to intervene in the Welsh economy. During our discussions on the Bill, we have debated fiscal powers and different elements of borrowing powers. However, we have not debated one lever that could be of enormous use to the Welsh Government and that might not necessarily cost a penny, but that would allow them to provide security to various infrastructure projects that might not take place without such backing.

New clause 2 would allow the Welsh Government to issue financial guarantees for private projects that they choose to support in such a manner. Government guarantees are useful for companies that are then able to draw down private investment to fund their projects. As I have said, these guarantees would cost the Government nothing, unless the project fails.

Effectively, guarantees mean that the Government financially underwrite a project. In many cases, guarantees are more useful for helping projects get off the ground than borrowing powers. It is a simple measure that would help the Welsh Government kick-start infrastructure development in Wales, boosting jobs and growth.

I need only quote what the Chief Secretary to the Treasury had to say about the importance of guarantees when he launched the most recent outline of UK Government-backed projects:

“The offer of a guarantee is helping to get projects going…There is a lot of infrastructure happening in this country because of this programme.”

The Institute of Civil Engineers said that the guarantee scheme had enabled

“viable projects to secure finance in difficult market conditions…It is an excellent example of government making creative use of its resources to get projects moving,”

Last October, the UK Government announced their £40 billion guarantee scheme. Projects earmarked for support included a £300 million biomass energy generation plant in Avonmouth in Bristol; a £400 million gas-storage facility in Islandmagee in County Antrim; two gas-fired power plants in Lincolnshire and Essex; mixed-use development of homes, offices and shops in Aberdeen; a wind farm on the Forth estuary; a renewable energy port facility in north Lincolnshire; a low-carbon fuel plant for commercial vehicles; development of the university of Roehampton campus in Surrey; a wood-fired generation plant in Tilbury in Essex; relocation of Northampton university; a Five-Quarter Energy gas plant in the north-east of England; and ethane storage facilities at the Ineos Grangemouth plant near Falkirk in Stirlingshire.

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If we look at the UK Government’s list of prequalified projects, which was updated on 16 June, we will see that none of those projects is in Wales. Despite heady announcements from the UK Government about “co-operation agreements” and the inclusion in the national infrastructure plan of projects in Wales, not one has even reached the prequalified stage, according to the publicly available list.

The UK Government guarantee scheme should not be confused with the national infrastructure plan, which is a wish list of future projects. The plan does include the proposed Wylfa B, with a promise of UK Government financing help following planning approval. The national infrastructure plan of December 2013 mentions

“a new cooperation agreement with Hitachi and Horizon with the aim of being able to agree an in-principle guarantee by the end of 2016 to support the financing of a new nuclear power plant at Wylfa, subject to final due diligence and ministerial approval.”

It has, therefore, still not reached the prequalified stage.

Returning to the UK Government guarantee scheme, the eagle-eyed will notice that none of the prequalified projects is located in Wales. Therefore, the Treasury is using Welsh taxpayers’ money to underwrite projects in other parts of the UK, and Wales has so far seen precious little, despite desperately being in need of better infrastructure to drive forward the Welsh economy. Driving forward the Welsh economy would be a real effort to rebalance the UK economy geographically, yet this Government have no real interest in doing so. They should either bring more infrastructure projects to Wales, or give the Welsh Government more tools to do so. I and my Plaid Cymru colleagues believe that it is for the people of Wales, through their democratic institutions, to decide which infrastructure projects to underwrite and where.

3.15 pm

The UK Government have pledged to underwrite the £4 billion Thames super-sewer here in London. Some might regard that project as especially high-risk, considering the widely recognised indebtedness of Thames Water, a company that failed to pay any corporation tax last year, despite its profits increasing 79% to £259 million.

A few months ago, Welsh Members were invited to a meeting by the £280 million Circuit of Wales developers in Blaenau Gwent. They informed MPs and peers that one of the measures they needed above all else to get the project going was a Government guarantee. Hardly a week goes by without some Labour MP, Assembly Member or Lord saying that the circuit could be the saviour of the Welsh valleys. Today, Labour MPs will have their opportunity to give the Welsh Government the power to issue the guarantee required to get the project going. As ever, I do not hold out much hope that Labour MPs will put the communities they represent first, but the way they vote will be a matter of public record.

Our new clause 2 proposes that the Welsh Government should have the ability to issue guarantees—ultimately guaranteed by the Treasury—worth 5% of the UK Government scheme. That would enable the Welsh Government to underwrite £2 billion-worth of infrastructure projects, which would inevitably provide a significant boost to the Welsh economy.

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Technically speaking, a guarantee gives rise to a contingent liability for the Government. In other words, it is a potential liability depending on something happening that will trigger the guarantee and require funds to be paid in full or in part to satisfy the guarantee. Given the uncertain nature of such liabilities, the Government do not score them against departmental expenditure limits, unless and until they result in payments being made.

The major infrastructure projects announced, or semi-announced, for Wales by the UK Government—the M4 relief road and rail electrification—will not come through infrastructure guarantees, but via puppet-master strings. The UK Government are seeking to force a future Welsh Government to use their borrowing capacity for the first, and the second is a complete shambles because neither Government can agree on who said what they would pay for.

Ultimately, Wales should get its fair share of economy-boosting infrastructure projects and the Welsh Government should be empowered to provide guarantees, without the constraints placed on them by Westminster as with the other cases I have just mentioned. If used prudently, the guarantees need not cost the Welsh taxpayer a single penny. It is a simple and effective mechanism.

The UK Government’s proposals in the Bill effectively handcuff the Welsh Government. They are saying, “You can have tax powers, which can’t be used due to the lockstep, and you can have borrowing powers as long as you spend them on our preferred projects.” They are treating the Welsh Government and the people of Wales with contempt.

In these remaining stages, the Secretary of State needs to rethink his position. The leader of the Conservatives in Scotland has described the current Scottish fiscal arrangements as those of a “pocket money Parliament”. Surely there should be a better deal on offer for the people of Wales. A Bill genuinely aimed at helping the Welsh Government to drive forward economic growth would at the very least include this new clause.

My Plaid Cymru colleagues and I also tabled amendment 8. We remain concerned that the UK Government will seek to shackle the ability of a future Welsh Government to use the borrowing-for-investment powers as they see fit. The case in point is the plan to use the new borrowing capacity for a new M4 road. Plaid Cymru has long advocated infrastructure investment as a means of creating jobs and developing the Welsh economy, which still languishes at the bottom of the UK economic league table. However, it would be a dereliction of duty by any future Welsh Government if they agreed to use their borrowing capacity solely to fund a new M4 road, because, first, there are far better ways of relieving congestion on the existing M4 in south-east Wales; secondly, any future Government of Wales will have a duty to the whole of Wales, not just the south-east; and thirdly, if the powers are to be devolved, surely it should be a matter for the democratically elected Government of Wales to determine their own priorities, not a matter of command and control from the Treasury.

The Bill as drafted says that the Treasury will have final say on any infrastructure projects in Wales paid for via the borrowing powers. Our amendment 8 would enshrine the right of a future Welsh Government to choose as they see fit. Ultimately, as in other areas of the Bill, the Westminster Government are saying, “You can

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have the power to do x, y and z, but we still retain the right to overrule you or to attach conditions and caveats so that the power cannot be used freely.” We have seen that with the Government’s addition of the lockstep, the cherry-picking and the complete failure to give to Wales any devolved powers that match those for Scotland and Northern Ireland.

When the UK Government announced that they would make money available for investment in a new M4 relief road, it was unclear which funds would be allocated. As the Bill’s contents were gradually revealed, it became apparent that the Westminster Government intended to bind a future Welsh Government’s hands on the borrowing powers available by funnelling the new power into the project that they saw as the one worthy of investment—namely, the priority from a Treasury perspective. It is highly telling that the Government here want the money to be spent on the M4, as they see Wales through a colonial lens. For Westminster, Wales is worthy only of mineral and natural resource extraction and as a source of labour, which means that its only interest is in maintaining east-west links and that it has no interest in developing infrastructure internally in Wales.

In a close parallel, the UK Government stated that they would electrify the great western line to Swansea and the valley lines, but then reneged on their word. That also revealed the incompetence of the Labour Government in Wales, who completely failed to nail down the Westminster Government on the precise terms of the agreement. All along, the people of Wales are being let down by unionist parties who squabble among themselves and who deliver only mealy-mouthed promises and an economy in Wales that is still languishing.

Mark Tami: Will the hon. Gentleman please explain or elaborate on the imperialist nature of the M4, because I am slightly at a loss?

Jonathan Edwards: The point I am making is that all the investment seems to be on an east-west basis, rather than on a north-south basis.

Hywel Williams: Apropos of that intervention, I would have thought that the hon. Member for Alyn and Deeside (Mark Tami) was rather more interested in developing the A55 than the M4.

Jonathan Edwards: I am sure that that very useful intervention will be noted by the constituents of the hon. Member for Alyn and Deeside (Mark Tami).

Plaid Cymru recognises the issue of congestion on the M4 corridor around Newport and wants investment to take place. However, the current Labour Welsh Government’s preference for a new M4 to the south of Newport at a cost of £1 billion is a disproportionate solution to the amount of congestion. According to Friends of the Earth and Professor Stuart Cole, the Welsh Government consultation documentation overestimated traffic growth in 2012 and 2013. The flows were lower than the Welsh Government predicted, so they do not have a strong enough statistical base on which to justify such a huge financial and environmental cost. As the Federation of Small Businesses has pointed out, committing the vast majority of Welsh borrowing capacity and

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money from outside the borrowing limit in the Bill to one single project is misguided and does not serve the whole of Wales or the whole of the Welsh economy.

Paul Murphy (Torfaen) (Lab): I am listening with extreme interest to the hon. Gentleman’s points. It seems to me that Plaid Cymru is therefore actively opposing the development of the relief road around the M4, which he will have to explain to those who vote for Plaid Cymru in Gwent and Glamorgan.

Jonathan Edwards: I have huge respect for the right hon. Gentleman. I will outline two alternative proposals that would be a better use of the borrowing capacity of the Welsh Government than blindly following what the Treasury wants.

The new M4 will not be a quick and decisive solution, despite what its supporters say. It will not be completed until 2031, according to the Welsh Government. The £380 million blue route, an upgrade of the A48 corridor that includes flyovers, would represent better value for money and would avoid the environmental damage caused by building on the Gwent levels to the south of Newport. The road upgrade would be accompanied by modern traffic management methods, such as signage to direct traffic flows between the A48 and the existing M4, depending on congestion levels. The blue route is future-proofed until 2035 and, if needed, it could be developed further beyond 2035. Money saved by developing the blue route could be invested elsewhere in Wales. In our previous transport consultation, Plaid Cymru identified transport needs in north, mid, west and south Wales. Above all, Plaid Cymru’s proposal to support the blue route is more innovative and balanced than the proposal with which the Labour and Conservative parties are trying to push ahead. Wales must not get tied into the UK Government’s deal on the M4.

Ultimately, although a new route is needed to relieve the pressure on the M4, what is really needed is the development of a metro system for south-east Wales and the valleys. Early estimations have put the costs at about £1 billion. The reality is that the M4 is used as a local road in south Wales, as the right hon. Member for Torfaen (Paul Murphy) well knows: 40% of journeys made on the M4 in that area are local ones of less than 15 miles. This means that—in one act—commuter journeys could be transferred to a metro system to relieve the pressure on the M4. The great thing about a metro system is of course that, after the initial outlay, a ready stream of revenue is provided through ticket sales that could be used in part to repay the initial expense and reinvest in services and upkeep. The success of the Newcastle and Tyneside metro could be repeated in south Wales if we had the necessary vision.

In conclusion, it appears that the Westminster Government are intent on binding the Welsh Government’s hands on how they utilise the borrowing capacity. The M4 relief road is a case in point. Unfortunately, the current Labour Welsh Government lack the ambition and vision to do something different, and are blindly following the UK Government’s lead. Amendment 8 would make sure that a future Plaid Cymru-led Welsh Government were not bound in the same way but could prescribe more intelligent solutions to infrastructure problems and provide a boost for the whole of the Welsh economy, rather than just the primary corridor

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routes in and out of Wales that concern the Westminster Government. With your permission, Mr Deputy Speaker, I will therefore definitely push amendment 8 to a vote at the appropriate time.

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