Budget 2012 Speech

Any speech on the Budget must begin by reminding Members of what was not mentioned in last Wednesday’s statement: the fact that real economic decisions were made years ago, when the London parties began to introduce major cuts and participate in their own Dutch auction in the run-up to the 2010 general election.

The Chancellor has argued that it is possible to achieve something called “expansionary financial contraction”, under which the economy grows while Government spending is cut. The poster boys for such a strategy are rare. Commentators have pointed to Canada in the 1990s and the Republic of Ireland before that. What these examples had in common, however, was that their fiscal contraction came at the same time as others were enjoying growth. Our major trading partner, the EU, is in some difficulty, and therefore this is a very risky strategy.
If we need any proof of that, let us remember that when the coalition in London began in 2010 expected growth for this year, according to the then newly founded OBR, was 2.8%. On Wednesday, however, the OBR said that growth this year would only be 0.8%. And all this with 90% of the cuts still to come!

Our solution, right from the start of the crisis, was to call for infrastructure spending on roads, hospitals, homes and schools to get people into jobs now and help us in the future. Low interest rates mean that borrowing is as cheap as we are ever likely to see, and that should be used to invest. We welcomed the announcement in the autumn statement of the national infrastructure plan, which included several elements of what we included in our build for Wales programme. I note, however, from the announcement on Wednesday, that the purported figure of £25 billion in the pot to be raised on pension funds has been knocked down slightly.

Something that is likely to hit the Welsh economy in particular is the continued progress of plans towards regional pay for public sector workers. Major employers, such as the Driver and Vehicle Licensing Agency and the Department for Work and Pensions, will apparently be in a position to make such a choice later this year. We saw from the pay bands introduced in the Courts Service by Labour in 2007 that Wales and other low-wage economies in the British state are likely to be hit. Although I fully agree that the private sector needs to be helped in Wales, I do not think we will do that by cutting public sector pay.

It was disappointing that the Chancellor once again ignored our calls for a meaningful fuel duty regulator to stop price hikes at the pump. Working families and rural families spend more of their disposable income on travel, so we need to give them all the help that we can, while at the same time developing greener travel alternatives. Sadly, much of what I would have liked to have seen in the Budget is not there—ideas to create jobs through investment, a windfall tax on energy profits to improve housing and a U-turn on the major cuts.

I would also like savings to be made by ending the higher rate relief on pensions, and a Twm Siôn Cati tax on international currency transactions should raise about £16 billion, which we could invest. I would predominantly like to see the Treasury scrap the unjust housing revenue account subsidy scheme in Wales—the only part of the British state where it operates—which means £80 million being taken from the poorest communities in Wales.

The last three decades have shown that the alternative to the austerity cuts will not come by changing the colour of the Government down here in London. The only hope for the people of Wales is for us to break the economic cycle and take on greater responsibility for our own future—to develop our economy, invest where we think is right and fight for a better Wales.

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