I found my hon. Friend's intervention most helpful. I would add only that I think that the ports authority to which my hon. Friend referred has been a large donator to Conservative party funds over the years. Perhaps the two factors of its role in the development and the encouragement that the Welsh Office is giving are not unlinked.
I wish to delve more deeply into the costs of the project; they appear rather uncertain. We are told that the latest direct cost of the barrage, at 1991–92 prices, is £152.76 million. As the background documentation provided by the Welsh Office shows, that makes a number of assumptions. For example, it assumes that inflation is based on the gross domestic product deflator at market prices dated March 1992—right the way through to 1995–96. We all know that since March 1992 a great deal has happened to the British economy. Even more has happened in the past month which renders all sorts of forecasts, assessments and calculations dubious to say the least, and it makes those who have been making the forecasts look extremely silly, not least the Chancellor. I am doubtful that that will turn out to be the final cost if the project proceeds. It also assumes inflation at a constant 2.5 per cent. after 1995–96. How can anyone project what inflation will be after 1995–96, especially with the pound bobbing up and down as it is? For the life of me, I cannot understand.
I question whether even the basic ball-park figures given by the Welsh Office stand up. Nevertheless, the figure of £152.76 million is extremely large, although it appears that the total public sector contribution will be nearly double that amount, at about £300 million. Perhaps the Minister can clarify that for me at an appropriate moment. We are talking about a great deal of money for something that offers the Welsh economy—as opposed to Cardiff—very little return.
Let us consider the details of the figures given by the KPMG Management Consulting report, which analyses the costs. My hon. Friend the Member for Merthyr Tydfil and Rhymney has considered that report in some detail. It contains a series of questions that we need to ask. Page 12 of the report gives a figure of £34 million for public utilities with the barrage, and £25.5 million without it. Nowhere in the background documentation made available for the debate does it explain what those public utilities are, although it may be tucked away in files from some years ago. Do they include privatised utilities which are simply described under the generic heading of public utilities, in which case there is presumably no ultimate cost to the Exchequer? Do they include what few genuinely publicly owned utilities we have left, such as the Post Office or British Rail, in which case there would be an impact on the public sector borrowing requirement if nothing else?
There is a great deal to be asked about the detail of the report, which seems flimsy and skimpy to me. If the Minister responds to the debate, as I am sure that he will, will he answer those questions with greater precision than has been provided in the background documentation? We are entitled to question and challenge not merely the total cost involved but how it is made up. We are even more entitled to do so when we consider some of the assumptions in the KPMG report, which has been put before us as a bible on the background information to the discussion.
On page 16, in paragraph 4.15, the report states that in making the assumptions about the return on the investment that the Government are contemplating and that the private sector will be invited to contemplate,
Whilst the key projected rental (and land value) growth rates have been adjusted downwards"—
over the previous assessment—
the scale of this adjustment reflects the fact that Chesterton"—
do not consider that the current recession in the property market has substantially undermined the growth rates incorporated within the January 1990 economic appraisal.
What an extraordinary statement to make. The property market has almost collapsed and property values are spiralling downwards, but KPMG suggests that the Cardiff bay development will somehow pass by that phenomenon. On page 17 of the KPMG report, in paragraph 4.17, the consultants, Chesterton, are cited as saying:
The current recession and any decline in property values represents a shortterm downturn in the market and will have only a limited impact on longterm growth rates.
I find that assertion absolutely staggering. As my hon. Friend the Member for Merthyr Tydfil and Rhymney has said, that is an ostrich-like approach. The consultants are burying their heads in the sand or the wastelands of the British economy.
Judged by current economic trends in the United Kingdom economy, and certainly in the Welsh economy, the property market has collapsed and there is no prospect of it reviving and returning to the growth levels and the return on investment levels that were predicated in the report. The report is fatally flawed and, therefore, the economic case behind the Cardiff bay development is also fatally flawed.
In the past few years we have witnessed the end of the grand property development era. Then, one could have a plan based on visionary, large-scale developments that centred on return on property rather than real economic indicators and forces. In this context one need look no further than the example of Canary wharf, which is relevant to the Cardiff bay development in terms of property values—I am not seeking to make wider comparisons about specific characteristics or objectives. Canary wharf carried a total investment of £3 billion. The original prospectuses for Canary wharf that drew in such investors as Olympia and York—at huge cost and its ultimate bankruptcy—contained all sorts of optimistic predictions of the kind now made in the KPMG report and by the Welsh Office on behalf of the Cardiff bay development project.
The banks, predominantly British but some foreign, are now owed £1.2 billion by the Canary wharf developers and they have no prospect of getting it back. How many loan financiers, capital venture sources and banks will be required to put in the significant sums of money, although not of the scale required by Canary wharf, needed to realise the dreams that the architects of the Cardiff bay development have advanced?
It is also significant that 4.5 million sq ft of space is empty on Canary wharf and just 11 per cent. of the site has been filled. That has relevance for the Cardiff bay development when one considers the plans for its wider site. What is the likelihood of the Cardiff bay development filling all the office space that it is providing? That question has even greater importance when one considers the United Kingdom economy. In Cardiff, as much as 30 per cent. of office space is empty now.
The London docklands project is similar in many respects to the Cardiff bay development. An independent corporation was set up which is not directly accountable to local authorities or to the local people. It was pushed through by the Government and displayed much of the same thinking as that for the Cardiff bay development because all the eggs were put in the property basket rather than being devoted to industrial and manufacturing development. The local economy in London's docklands has all but collapsed, with house prices having plummeted. Although the local people need housing, many of the houses provided as part of the docklands development—built at prices far greater than local folk could afford—are standing empty because they cannot be sold. About 40 per cent. of office space in London's docklands is also empty. All in all, we have much to question about the economic and industrial assumptions behind the Cardiff bay development project.
It is also interesting to note that average unemployment in London's docklands now stands at 21.6 per cent., the level of unemployment to be found in the valley communities of south Wales. Yet London's docklands was intended to be a leading pace setter for the new Britain and was going to show the way for developments elsewhere in the country. Newham has an unemployment rate of 21.9 per cent.; Tower Hamlets, 24.4 per cent.; Southwark, 20.3 per cent. That is the position after all that money has been ploughed in through the London Docklands development corporation. When we consider the prospects facing Cardiff bay and the economic investment involved and then weigh up the pros and cons, we see the fundamentally flawed thinking behind it.
I draw attention to an aspect of the KPMG report to which my hon. Friend the Member for Merthyr Tydfil and Rhymney referred. Table 11, on page 26, gives a calculation of direct employment effects. Not only does it show that with the barrage there will be 1,232 fewer industrial or manufacturing jobs, but it suggests that there will be 1,619 more retail jobs and 2,184 more leisure jobs than if the development proceeded without the barrage.
Such prospects are greatly welcomed by local people, but I question the whole economic thinking behind the figures. I refer to the assumption that dominated the Thatcherite years, that is being continued in the Major years and is apparently being followed in the Hunt years in Wales. There is a belief that we can have retail, leisure and service industries without a manufacturing base. That thinking is flawed. It has led us into a situation in which we have a chronic balance of payments crisis throughout the United Kingdom economy and a chronic balance of trade crisis in the Welsh economy.
I do not believe, if the development goes ahead, that we shall achieve the creation of that level of jobs. The figures do not add up. Laid out for us in this initiative by the Government, along with all their other policies, is an attempt to turn south Wales into a low-skill, low-wage, low-quality assembly line service economy, diversified here and there but without any serious attention being given to the desperate need for investment in manufacturing industry which is capable of reviving our economy and providing the essential base and foundation from which all other developments could then derive.
If the Cardiff bay development had been put forward against the background and within the context of a serious industrial strategy for Wales which was geared at reviving the manufacturing base of the valley communities—recognising that they are industrial villages with traditions and skills to offer which, if harnessed by Government support, could build a prosperous new future—I might be taking a more sanguine attitude towards the Bill. I still might have questions to ask about the essential fallacies of the property basis of the economics behind it, but I might be prepared to put such questions on one side because the Government were recognising the needs of the valleys, the need for manufacturing investment and the need to build a real economy as opposed to the flotsam and jetsam economy that is offered to us now.
To find the essential flaws in the economic strategy underpinning the Bill, one need look no further than south-east England. Its economy was said to epitomise the success of Thatcherism, consisting entirely of services and retail and leisure developments—many marinas and peripheral, nice-looking developments but no serious economic development. In the past few years, south-east England has suffered even greater unemployment increases than the valley communities have experienced until now. That has happened because it is an economy built on shifting sand, with no real basis. I fear that the Cardiff bay development project will end up going down the same route.