[Andrew Rosindell in the Chair]

– in Westminster Hall at 3:00 pm on 29th November 2012.

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Photo of Mark Williams Mark Williams Liberal Democrat, Ceredigion 3:00 pm, 29th November 2012

It is a pleasure to serve under your chairmanship in this rather intimate and select gathering, Mr Rosindell. There are important issues to be raised, but I will resist the temptation to talk about future inquiries and previous inquiries. I do not seek to emulate the lengthy contribution that we heard earlier in any way.

I am pleased that the Select Committee undertook its inquiry, and I congratulate its Chair, my hon. Friend David T. C. Davies, on the way in which he introduced this topic, as well as, of course, his chairing of our Select Committee. He has a knack for choosing the issues of the moment.

Inward investment is critical because the circumstances in which Wales finds itself are different from those of the glory days of inward investment that we saw in the 1980s and early 1990s. On the global stage, the background of the Select Committee’s inquiry is that, since the 1980s, world trade in goods and services has increased more than sevenfold, while the emerging economies have seen their share of trade quadruple and there has been a fourfold increase in the effective supply of global labour. That is a continuing trend for China and India, which are expected to add more than 30 million workers to the world’s labour pool by 2030.

As the Committee’s inquiry identified, Wales can no longer assume that overseas companies will be tempted to invest by the traditional inducements of grants and low labour costs. We have to adapt continually to challenging and consistently changing domestic and global conditions to attract new inward investment, which means working smarter and more flexibly to find more innovative ways to encourage inward investment into our country.

I will focus specifically on two issues that we investigated in the inquiry: the importance of higher education; and infrastructure. First, let me address the importance of the knowledge economy. As emerging economies move up the value chain to compete with Western companies in the manufacture of high-tech products and attracting research and development investment, the OECD has stated:

“If developed countries are to remain competitive in the global economy, they will have to rely more on knowledge, technology and intangible assets.”

In practice, that means that today’s students and graduates will have to provide cutting-edge research—not just research for research’s sake, but research that has a commercial edge—that will ensure our nation’s prosperity.

Our inquiry shows that there needs to be far greater partnership working between the higher and further education sectors, and industry, as well as closer engagement with business. In that spirit, I welcome one of the things that Geraint Davies said in his long speech: the developments in Swansea bay and Swansea university’s second campus. The university’s vice chancellor has met many Members of Parliament to celebrate the work he hopes to achieve at the second campus. I hesitate to say this, but in the new budget agreement between the Labour party and Plaid Cymru in the Assembly, there was a commitment of some £10 million for a science park. That will largely be in Bangor, but I hope there will be significant rub-off on Aberystwyth university, too, because that is also important.

At Aberystwyth university in my constituency, there has been meaningful partnership for a long time with the commercial sector and developing economies in other parts of the world. For a medium-sized university, it punches well above its weight. There is investment in research that seeks solutions to many global issues, and over the next five years, the university’s world-leading research will address the major challenges faced across the world. I have repeatedly talked about the Institute of Biological, Environmental and Rural Sciences over the past seven years, for which I make no apology, because excellent, world-leading research is being undertaken in fights against famine, climate change, loss of biodiversity and disease. Collaboration between researchers in Aberystwyth, Africa and India is already leading to breakthroughs in the fight against famine with the development of climate-resistant crops. Such excellent research, which is often talked about, is happening, so the challenge is to market it overseas more effectively and rigorously.

Recently, to commercialise its intellectual property, Aberystwyth university has been developing cutting-edge smartphone technology—that is not unique to Swansea; it is happening in mid-Wales, too—and it is leading the way in developing mobile apps. In recognition of the university’s innovative approach to exploiting its intellectual property and expertise through smartphone platforms, it was awarded funding for those developments by the UK Intellectual Property Office.

The good work that is happening across higher education not only benefits my local economy in Ceredigion and those places where partnerships have been formed, but encourages students to identify and develop commercial ideas, which is a key role. In other words, that is exactly the sort of creative entrepreneurial activity that needs to be encouraged and supported in the HE sector.

Our report highlighted research funding. We also noted that in a report on inward investment during the previous Parliament, but Wales has not been successful at securing its fair share of research funding, which remains a problem, so that battle needs to be waged.

One idea we heard in evidence was for business angels to come in and help to develop products more quickly and get them to market. That is the sort of idea that could be picked up by a local firm, academics or students, and spun out into a company. For a company to develop in those early stages, it needs the right facilities, and that might be a role for the emerging science park that the Administration in Cardiff are pursuing.

We are some way off facilitating such ideas at any great size. We need more joined-up thinking from the Welsh Assembly Government to offer support to such facilitators of enterprise. Support needs to be tailored to skills and the innovation that is happening at any one time, rather than divided into prescriptive sectoral targets, as the Assembly Government have done. There was a debate about whether those sectoral targets are right and what additional targets should be added. For example, the absence of tourism is a key issue affecting my area, and it was subsequently added. That was welcome, but it took some time for the Assembly Government to reach that conclusion.

We have heard about reinforcing the Welsh brand, and it makes sense that Welsh Government overseas offices should be collocated with UK Trade and Investment offices so that the Welsh Government can efficiently utilise the strength and capabilities of UKTI. Wales does not have sufficient resources to work alone in attracting inward investment to Wales, and we must make every penny count. I concur with Jonathan Edwards, whom I welcome back from Cape Verde, on the welcome addition of a UKTI official in Wales. The partnership between those two groups, which was not always evident in the discussions and inquiries we had, both in Germany and here, needs to mean something practical if things are to be achieved.

Finally, on connectivity, we asked UKTI about its checklist of motivators to attract people to invest in Wales. The hon. Member for Swansea West was constant in pushing for the recognition of the quality of life in Wales, and we can all empathise with the life experience of living in Wales. The list of motivators also included the transport network and broadband. I welcome the announcement on electrification for south Wales, and I applaud what the Wales Office and my hon. Friend Guto Bebb have been doing to highlight electrification for north Wales. I am not yet going to launch a campaign for electrification for mid-Wales, but I will reiterate—despite the lack of an audience, because of events elsewhere in the Palace—the case for an hourly service on the Cambrian line between Aberystwyth and Shrewsbury. Paul Flynn, who is no longer in the Chamber, might not appreciate that, and this is technically a devolved matter, but it impinges on my area’s capacity to develop economically.

Aberystwyth might well be perceived by many to be at the end of the line—and not only in the physical sense—but we have the highest proportion of small businesses per head anywhere in the United Kingdom. Aberystwyth is also a strategically important university town with a large skills base in a county whose huge tourist opportunities have been recognised by the Wales Tourism Alliance. That is one reason why we will be looking to mid-Wales, rather than taking up the captivating invitation to join the city region in Swansea bay—it is pushing it a bit for us in Aberystwyth to join the hon. Member for Swansea West down there. Aberystwyth is a strategic town of significance—that is our focus, and it has been recognised by the National Assembly—and we want that recognised in our transport infrastructure as well.

In his evidence to us, Professor Stuart Cole said this is not about the headcount on the train between Aberystwyth and London, but much more about interconnectivity. There are few peripheral areas of the United Kingdom where people cannot get a direct service to London. As a student, 27 years ago, I could get the seven o’clock inter-city train from Aberystwyth to London, and freight came into Aberystwyth as well, but that has long since gone and we do not even have an hourly service. Having such a service is important, because it could re-energise parts of mid-Wales, from Welshpool, through Newtown, Machynlleth and Caersws, and along the infamous route to Aberystwyth.

Photo of Geraint Davies Geraint Davies Parliamentary Assembly of the Council of Europe (Substitute Member)

Having been on holiday every year of my life to Aberystwyth, I would concur that there is a great opportunity for cultural, environmental and all sorts of other tourism.

Photo of Mark Williams Mark Williams Liberal Democrat, Ceredigion

I am grateful for that endorsement. Of course, there are Dylan Thomas connections, as well, if we go a bit further down the coast to New QuayCei Newydd—in my constituency. I thank the hon. Gentleman for that intervention.

I was disappointed when the Select Committee went by train to Aberystwyth a couple of weeks ago. I was grateful that the Chair encouraged the Committee to go, but when the Welsh Government Transport Minister, Carl Sargeant, came to see us, he confirmed that we would not see the hourly service until 2015, despite the fact that we had been promised it for 2014, and despite the fact that all the infrastructure has been done.

On broadband, I very much welcome the £425 million agreement between the Welsh Government and BT to deliver next-generation broadband to 96% of Welsh homes and businesses by 2015. I am glad that my hon. Friend the Member for Monmouth mentioned that rurality is important. This is not just about the M4 corridor or the A55. There is a bigger picture, which some of us will not stop talking about. There is real potential across Wales to attract businesses, but the proof of the pudding is in the eating. We need hard, imaginative, bold targets, but we also need to see the reality.

Finally, the inquiry clearly identified that the Welsh Government need a dedicated trade promotion agency. The evidence shows that, since 2004, investment opportunities have been missed because of this omission, and Wales branding has taken a knock since the days of the Welsh Development Agency and the loss of the Wales Tourist Board. Branding Wales is hugely important; it is tough out there, but we have a strong product that makes Wales stand out from the crowd. I am thinking particularly of culture, outdoor pursuits, tourism, the creative industries, and the potential jobs and wealth created by holding events such as the Ryder cup. There are huge opportunities for us and, in that context, the Select Committee report was highly valuable. In particular, the sections on infrastructure and higher education resonate strongly in terms of the future development of my area.

Photo of Andrew Rosindell Andrew Rosindell Conservative, Romford

I invite Jonathan Edwards to resume his speech, which was interrupted by the Division.

Photo of Jonathan Edwards Jonathan Edwards Shadow PC Spokesperson (Treasury), Shadow PC Spokesperson (Business, Innovation and Skills), Shadow PC Spokesperson (Transport), Shadow PC Spokesperson (Communities and Local Government), Shadow PC Spokesperson (Culture, Media and Sport), Shadow PC Spokesperson (Wales) 3:14 pm, 29th November 2012

Diolch yn fawr, Mr Rosindell. First, may I apologise to Members for rudely interrupting proceedings to perform my telling duties in the series of close votes we have just had in the main Chamber?

Before the Divisions, I was remarking on the importance of transport links, which is clearly emphasised in the report. Wales is located at the centre of one of the most important trading routes in the European Union, so it is vital, with the ongoing negotiations among our partners at a European level, that there is at least a southern link running through south Wales and linking the Republic of Ireland with Britain and Europe. Personally, I would also like to see a northern link going through north Wales, which would then fund the improvement of transport infrastructure there. I welcome the fact that the Government are actively looking at that, and I am glad to put that on the record.

I want to touch briefly on the bilateral negotiations on funding for the Welsh Government and on the recent Silk commission, which reported as I left on my honeymoon. Both those things impact directly on the Committee’s report. First, on the bilateral negotiations, I was disappointed that there was no reform of the block grant; there was not even a Barnett floor, let alone reform of the housing revenue account subsidy scheme. On the borrowing powers that were announced, the reality is that we could not buy a packet of crisps using the current powers. The Welsh Government Finance Minister has been completely outfoxed, yet again, by the Treasury.

The conclusions of the bilateral negotiations might, however, come into play if the recommendations of the Silk commission are implemented, so their full implementation could be of value. To access the borrowing powers announced in the bilateral agreement, we need fiscal levers to raise revenue, so the more tax-sharing arrangements there are between the Welsh Government and the UK Government, the better. That is why it is imperative that we do not stick just to the minor taxes preferred by the Welsh Government—stamp duty, the aggregates levy and the long-haul airport tax—but devolve sharing arrangements for income tax, which would enable the Welsh Government to have far greater leverage in terms of their borrowing powers. Given that their capital budgets are being cut by 42%, they need those borrowing powers, not only so that they can level out peaks and troughs using fiscal levers, but so that they have power to invest. The current position of the First Minister is therefore completely bizarre, and it is a huge let-down to the people of Wales.

Fiscal powers are important with regard to political accountability, which is something that finds favour with Conservative Members, but the main reason we should have fiscal powers is that they would incentivise the Welsh Government to turn the Welsh economy around. At the moment, given that they get a block grant, there is no incentive for them to develop it. If they were responsible for raising their own revenue, there would be an incentive to generate wealth to invest in public services.

Photo of Geraint Davies Geraint Davies Parliamentary Assembly of the Council of Europe (Substitute Member)

Is the hon. Gentleman’s position that Wales should have devolved power over income tax, and that a proportion of that could be used as a revenue stream to pay back borrowing, but that Wales should not use tolls to pay back borrowing which, as I said, is a tax on inward investment and trade?

Photo of Jonathan Edwards Jonathan Edwards Shadow PC Spokesperson (Treasury), Shadow PC Spokesperson (Business, Innovation and Skills), Shadow PC Spokesperson (Transport), Shadow PC Spokesperson (Communities and Local Government), Shadow PC Spokesperson (Culture, Media and Sport), Shadow PC Spokesperson (Wales)

The hon. Gentleman has a long-standing position on this. He has explained my position on the importance of the devolution of income tax quite adequately. The reality is that if we devolved an income tax-sharing arrangement, we would, even if we did not change the level, have huge leverage to borrow far more. Personally, I would like the Welsh Government to have responsibility for setting tax bands, but the reality is that we are nowhere near getting into that debate.

On the tolls, I would like the Welsh Government to have responsibility for the Severn bridges, because they are the major access route to the south Wales economy. There would be a leverage potential on the revenue, but that is not my primary reason for supporting this. I would like the Welsh Government to have responsibility for the tolls and to set them at a rate that would enable them, on top of maintaining the bridges, to have money to reinvest in wider Welsh infrastructure, but that rate would be far lower than at present.

I look forward to next week’s autumn statement, and plenty of progress on the bilateral negotiations and the Silk commission.

Photo of Susan Elan Jones Susan Elan Jones Opposition Whip (Commons) 3:19 pm, 29th November 2012

It is a pleasure to serve under your chairmanship, Mr Rosindell. I congratulate David T. C. Davies, the Chair of the Select Committee on Welsh Affairs, on securing this important debate, and on the work that he and the Committee have carried out on the inquiry into inward investment in Wales.

I agree with the Committee Chairman’s grave disappointment that the debate clashes with the statement on Leveson, and I hope that the topics that we are discussing will be revisited, as they are important. The hon. Gentleman reiterated eloquently the arguments that he has made in the past, together with my hon. Friend Jessica Morden and others, about the Severn bridge and the importance of Government transparency in that respect. There was a little bit of the knockabout partisan stuff that I do not much like; but there were social democratic tinges to the speech too—and I dare the hon. Gentleman to put that on his website. The point that it would not be desirable to compete with China on labour costs was a good start, as was the fact that he mentioned the importance of education and Government-funded infrastructure and transport. He is developing a bit more of a social democratic tinge, and that is to be welcomed.

My hon. Friend Geraint Davies made an eloquent and wide-ranging speech about, among other things, the importance of electronic global market reach; economic growth under the previous Labour Government of the United Kingdom; the pitfalls of regional pay and the tragic situation of Tata steel, with the related unemployment. He also spoke eloquently about the Welsh brand and tourism, and the importance of the Dylan Thomas festival, which I too welcome.

Mr Williams spoke about emerging economies and made an important point about links with universities, and working in partnership with them. I also want to add a plug for Glyndwr university, and its links to Airbus. He also spoke about the importance of tourism, and we would all welcome the fact that that is now a priority sector for the Welsh Government, and for all of us. He discussed the fact that it is important for Wales to work alongside UKTI, and the importance of infrastructure and rural broadband.

Jonathan Edwards was, again, a bit partisan, but I suppose that is his job, really. It was nice to see him back all suntanned from his honeymoon, and I do not want to be too partisan on this occasion. I am sure it is good to see him back with us. However, I want to make one small partisan point. The hon. Gentleman spoke of the importance of promoting Wales and of openness about how that is done, and mentioned foreign direct investment and changed attitudes to it. The tiny point I want to make is that I seem to remember the main opposition to that in the 1980s—it might have been in the ’70s too, but I am too young to remember—tended to come from the Welsh nationalists. As for the discussions on funding arrangements, Silk and the like, I am sure that we shall have that debate. I hope that it will be on the Floor of the House, where it deserves to be.

I shall try to be relatively brief, because I know that there are one or two other matters that hon. Members would like to participate in today. As the Government response to the inquiry says, the Committee’s report is comprehensive and wide-ranging. I will not respond to every one of the recommendations, but I hope to touch on the key themes. I want first to talk briefly about why inward investment is so crucial to the Welsh economy.

At the moment, at the aggregated UK level, it is difficult to see where a potential source of significant future economic growth lies, given the austerity agenda being pursued by the UK Government. Despite an Olympic-driven injection of 1% growth in the last quarter, yesterday’s—albeit slight—downward revision of previous quarters’ figures is a reminder that the Government’s economic policies have massively under-achieved. Two years ago, the Chancellor forecast growth of 4.6% but, in reality, in that time, the UK economy has grown by 0.5%. None of us can rejoice at that. Tellingly, the economy is the same size now as it was a year ago and it remains more than 3% below its pre-global financial crisis peak. The reason is clear to the Opposition: it is that Government spending is being cut too far and too fast, and household spending is being squeezed by the increased cost of living, thanks largely to the Government’s decision to increase VAT, as well as the impact of high inflation and rising energy bills.

With consumption—which accounts for around two thirds of the quarterly GDP figures—being held back, we need significant levels of investment if there is to be growth in the economy. However, the Office for Budget Responsibility has slashed its forecasts for growth in business investment over the past two years. They are down this year to a predicted 0.7%, which is a huge drop from the 8.6% predicted two years ago. We all hope that when the Chancellor gives his autumn statement next week he will give a far brighter forecast for growth in business investment for the years to come, because, with more than 700 international companies having located in Wales over the past forty years, the securing of inward investment is vital for Wales’ prosperity. I believe that the Welsh Government are acutely aware of that. In 2011-12, foreign direct investment into Wales created and safeguarded 3,706 jobs, which represents an increase of almost 5% on the previous year. For Ministers in the Welsh Government, who have had real-terms cuts to their capital budget of more than 40% imposed on them, but who are none the less tasked with offsetting the economic damage, the promotion of inward investment to Wales provides a vital economic lever.

The Committee’s report rightly acknowledges that it is down to both Governments to work together to boost inward investment, but it is also right to say that the Welsh Government’s role is pivotal. Hon. Members will know that only this week the Welsh Government presented their budget for 2013-14—a budget for jobs and growth, which reflects an unwavering commitment to attracting investment to Wales as a means of boosting the Welsh economy.

The Committee focused its investigation on three key areas that are central to inward investment, and in those vital areas highlighted by the inquiry the Welsh Government have already put in place policies that will boost inward investment. I am sure that hon. Members will welcome the fact that Ministers in Cardiff Bay have also found additional funding in those areas, as revealed in this week’s budget announcement. The areas in question, recognised by both the Welsh Government and the Committee’s inquiry, are infrastructure, promoting Wales abroad, and education and research and development.

The ambitious Wales infrastructure plan will invest about £15 billion pounds over the next decade in capital priorities. It sets out a sectoral and targeted approach to infrastructure investment that will help to create a Wales with modern transport, IT and energy networks. It outlines for the first time in Wales a list of existing schemes that are being delivered now and schemes that are in the pipeline to be delivered but have not yet started. That approach will enable the private sector to ensure that it is well placed and adequately skilled and resourced to support the infrastructure delivery that Wales needs over the next decade. The plan also features opportunities to lever in additional funds to finance infrastructure delivery, and in this week’s final budget announcement the Finance Minister Jane Hutt revealed additional capital investment of nearly £50 million pounds to support the plan further. The plan exemplifies the Welsh Government’s vision for attracting sustainable economic growth in Wales and should be welcomed by Members on both sides.

Of course, another massive boost to Wales’ infrastructure—and, we all hope, also to long-term levels of inward investment in Wales—is the confirmation we had in July that rail electrification to Swansea and the south Wales valleys is to go ahead. Agreement for this £350 million direct investment is a good example of the two Governments working together in the best interests of Wales. In the context of austerity measures at UK level, it is a remarkable achievement.

Photo of Jonathan Edwards Jonathan Edwards Shadow PC Spokesperson (Treasury), Shadow PC Spokesperson (Business, Innovation and Skills), Shadow PC Spokesperson (Transport), Shadow PC Spokesperson (Communities and Local Government), Shadow PC Spokesperson (Culture, Media and Sport), Shadow PC Spokesperson (Wales)

The hon. Lady mentioned that it was important to increase investment in infrastructure and we agree with that. The UK Government have announced an infrastructure investment plan of £30 billion, comprising £5 billion from public funds and £25 billion to be financed—different from funding—from the private sector. The Welsh Government get a Barnett consequential on the £5 billion, but not on the £25 billion. Can the hon. Lady explain what mechanisms the Welsh Government have put in place to access that £25 billion of potential investment finance?

Photo of Susan Elan Jones Susan Elan Jones Opposition Whip (Commons)

I will be honest with the hon. Gentleman. I am not able to give him the total details and I am not prepared to flaff and speak generally, but we will provide him with an answer.

This budget will bolster Wales’s economic competitiveness, generate jobs, increase mobility and, in the context of today’s debate, strengthen Wales’s bid for future inward investment.

Another way that the Welsh Government are going about improving transport infrastructure is by continuing to forge a close relationship with Cardiff airport. Ministers are determined to work towards modernising the airport and increasing its connectivity.

The second of our Committee’s central issues is Wales’s international standing and efforts by the Welsh Government to promote Wales abroad. Since the Committee’s inquiries, there have been significant developments on this front, which I am sure that hon. Members from all parties will welcome. In July, for example, the Welsh Government officially opened their new London headquarters, based on Victoria street, focusing specifically on promoting Wales to the world, attracting greater inward investment and boosting international trade. I welcome the fact that the office will be home to permanent staff with inward investment a large part of their remit. As our First Minister, Carwyn Jones, said when unveiling the new office,

“it will create an important base for the Welsh Government, and businesses from Wales, to influence decision-makers in the foremost financial and commercial centre in the world.”

Since then, the First Minister has also revealed plans to co-locate Welsh Government staff with UKTI, to forge an even closer relationship with staff there, which is most important, and to maximise their vital contacts and resources. At the same time, the Welsh Government have placed important emphasis on trade delegations, including recently welcoming a delegation from India, led by the country’s high commission, as well as two delegations from China in September. Just two weeks ago, the Welsh Government supported their largest ever delegation to an international trade event.

Photo of David Davies David Davies Chair, Welsh Affairs Committee

Although I welcome the efforts to promote Wales through trade missions, does the hon. Lady agree that it would be helpful if the Welsh Assembly Government were willing to work with the UK Government and arrange joint trade missions with Ministers in the Wales Office?

Photo of Susan Elan Jones Susan Elan Jones Opposition Whip (Commons)

I am sure that the Welsh Government and the Wales Office are able to discuss such initiatives. I welcome any trade missions. After graduating, I worked in Japan on a Japanese Government international programme, so I know first hand the importance of having such links and personnel, which were rather sadly downgraded by some people, in terms of international offices, and other such links. I am sure that collaborative working will be part of the Welsh Government’s and, I hope, the Wales Office’s thinking on this.

Some 70 representatives from the life sciences sector in Wales flew to Dusseldorf to take part in Medica, the world’s largest event for the medical sector, which featured more than 4,300 exhibitors. That is an excellent example of exactly the type of trade events that can create lasting relationships that can have long-term impacts on levels of inward investment.

A combination of a strong relationship with UKTI, a base for business in London and prioritising trade delegations shows that the Welsh Government get the importance of promoting Wales abroad. The same can be said for the importance of education and research and development, which are vital in their own right of course, but crucial too for the economic benefits that they can bring.

I hope that the Committee welcomes the many targeted investments that the Welsh Government have announced, particularly on the sciences, which the hon. Member for Ceredigion mentioned. Those investments include a £25 million investment in a dedicated life sciences fund, specifically designed to leverage a further £100 million in private capital for the life sciences in Wales. Science was explicitly mentioned in the report as being key to attracting inward investment. I hope that Committee members welcome this initiative.

I welcome the announcement from Education Minister, Leighton Andrews, that the Welsh Government have launched a £50 million campaign to attract the world’s greatest scientific minds to Wales. This ambitious scheme will enhance R and D in Welsh universities and market Wales’s research capability to the world’s leading scientists. In the budget announcement earlier this week, Finance Minister, Jane Hutt, also revealed support for the creation of a science and research facility led by Bangor university, to work in collaboration with Aberystwyth university. I trust that those examples of the Welsh Government’s finding innovative ways of encouraging inward investment will receive the Committee’s endorsement.

On the three areas that the Committee feels are central to increasing inward investment, the Welsh Government have put forward imaginative, innovative and—dare I say it?—patriotic policies and introduced a model that is flexible and responsive to our Welsh nation’s needs. They are actively pursuing a creative approach to encouraging inward investment, in the same way that they are pursuing an active industrial policy through enterprise zones, city regions and targeted funds for business, and pursuing an active approach to tackling long-term unemployment through Jobs Growth Wales.

On unemployment, I congratulate the Committee’s decision to launch an inquiry into the dismal failings of the Government’s Work programme and I look forward to seeing whether the Committee agrees with me that the Government should look to Jobs Growth Wales as an example, if they wish to make the work programme more effective.

The Welsh Government are doing all they can with the economic levers at their disposal and are being creative with plans to secure more inward investment. I hope that hon. Members from all parties endorse the many policies that I have mentioned this afternoon. Hon. Members will also be encouraged by how well Ministers in Cardiff bay and UK Ministers have worked together in Wales’s best interests, for example, on rail electrification.

To return to my introductory remarks, the best way that the UK Government can help Wales, not just on inward investment but on economic growth, is for the Prime Minister and the Chancellor to change course from their current austerity agenda and, like the Welsh Labour Government, introduce an active, engaged plan for jobs and growth to get our economy moving once again.

Photo of Stephen Crabb Stephen Crabb The Parliamentary Under-Secretary of State for Wales, Government Whip 3:37 pm, 29th November 2012

It is a pleasure to serve under your chairmanship, Mr Rosindell, and a privilege to round off this important debate on inward investment into Wales.

I pay tribute to the Chairman of the Select Committee, my hon. Friend David T. C. Davies, not just for his eloquence in setting out the terms of the debate, but for the way that he chairs the Committee. As Mr Williams said, he ensures that the Committee focuses on the important issues facing our constituencies and businesses in Wales, making the Committee’s work relevant at this time.

All hon. Members recognise that inward investment remains a significant driver of economic growth in Wales. As the Committee’s excellent report stresses, we must do all we can to enhance the contribution that inward investment can make to the economy in Wales. I think that the Labour Member, Paul Flynn, who is no longer in his seat, was being deliberately provocative when he suggested that the Committee’s report was trespassing into areas where it should not go. Inward investment into Wales is exactly the kind of area that the Committee should be considering. It should be looking at how the UK Government and the Welsh Government collaborate. Susan Elan Jones mentioned the rail electrification project, which required collaborative working between the two Governments. If we are going to achieve anything significant in Wales to achieve the step-change in economic growth that we all aspire to, the two Governments will need to work together over a wide range of areas, and inward investment is one such area. I am delighted that the report makes specific recommendations not only to Ministers at the UK Government level but to Welsh Ministers in Cardiff.

Several Members this afternoon have mentioned Wales’s impressive track record in securing inward investment. The Committee’s report rightly highlights the central role that the Welsh Development Agency played in winning new investment and jobs. During the late 1980s and early ’90s, Wales was regularly gaining around 15% of the inward investment and associated jobs coming to the UK each year. The WDA had an incredibly strong brand and, when I have the opportunity to travel overseas, I continue to meet business people abroad who still think the WDA exists. Such was the strength of the WDA brand globally, its disappearance was a loss, but we all need to look forward to new models of working.

Several hon. Members talked about the glory days—or the boom years—of inward investment in Wales, but we are in danger of sounding as if we are talking about the Welsh rugby team. They are great to talk about, but we cannot go back to those days. The entire global environment in which inward investment occurs has changed, which was recognised very much in the Committee’s report. Over the past decade, the inward investment figures for Wales have been declining. The growth in the knowledge economy and increased competition from developing economies around the world have changed the nature of inward investment in Wales. The Committee makes it clear that we are in a new environment for inward investment.

While we recognise that new environment, we must also remember that Wales still hosts major global companies that year on year continue to make significant and substantial capital investment in Wales. Companies such as RWE, Airbus, Ford and Valero show that Wales remains a good place in which to invest and make that capital expenditure. Members in all parts of the House will join me in welcoming last month’s announcement that Hitachi had bought Horizon Nuclear Power, which represents a £20 billion investment throughout the UK, potentially creating up to 6,000 construction jobs and 1,000 permanent positions in north Wales alone.

The UK economy is ever more dependent on external economic conditions, and we operate in an increasingly globalised economy. The effect of new entrants to the EU from eastern Europe, major developing economies such as China, Brazil and India, and many other countries means that Wales cannot compete on low labour costs, which were an important component in attracting the high levels of inward investment of previous decades. The growth of those developing economies, however, cannot be seen only as a threat to Wales, but as offering real opportunities that Welsh businesses must take advantage of. It is worth putting on record that Wales now exports more goods to countries outside the EU than it does than to those inside the EU, and that diverging trend is continuing. Over the past year, Welsh exports to EU countries fell by 7.4%, compared with an increase of 6.8% to countries outside Europe.

Wales needs to be more global facing. As my right hon. Friend the Prime Minister highlighted in his recent Guildhall speech, Britain is in a “global race”. Winning in that global race means that we need to show that the UK is open for global business. The United Nations world investment report shows that the UK remains No. 1 in Europe for foreign direct investment, and the Financial Times fDi Intelligence report for 2012 ranks the UK as the primary FDI location in Europe. Britain remains a great place for international companies to invest in, and our challenge in Wales is to ensure that Wales captures its fair share of that inward investment coming to the UK.

The global economic environment is difficult, but the Government have done a huge amount to ensure that the UK remains the top location for inward investment.

Our plan for growth sets out a programme of reforms across the whole economy to meet the UK Government’s four headline ambitions: to create the most competitive tax system in the G20; to make the UK the best place to start, finance and grow a new business; to encourage more investment and exports; and, finally, as the Select Committee report picks up on powerfully, to create an educated work force that is the most flexible in Europe.

Photo of Geraint Davies Geraint Davies Parliamentary Assembly of the Council of Europe (Substitute Member)

Does the Minister agree that the UK, and UKTI in particular, are in a position to do a lot of the heavy lifting, in terms of promoting the UK as a place to invest, for some of the reasons he is outlining? The opportunity for Wales is to focus and build on that benefit and to get people to go to Wales within the UK, as opposed to Wales doing the whole thing over again, given that it has fewer resources overall.

Photo of Stephen Crabb Stephen Crabb The Parliamentary Under-Secretary of State for Wales, Government Whip

I agree with the hon. Gentleman. UKTI is the agency that is best placed, given its network of relationships around the world, personnel, expertise and acquired knowledge. The challenge is for Welsh Government initiatives to dovetail with what UKTI is doing to ensure that we leverage the maximum opportunity from the available resource.

Photo of Jonathan Edwards Jonathan Edwards Shadow PC Spokesperson (Treasury), Shadow PC Spokesperson (Business, Innovation and Skills), Shadow PC Spokesperson (Transport), Shadow PC Spokesperson (Communities and Local Government), Shadow PC Spokesperson (Culture, Media and Sport), Shadow PC Spokesperson (Wales)

The UK Government, to be fair, have the laudable aim of rebalancing the economy geographically and sectorally. I know of one of their initiatives—the national insurance holidays for new employees—but what other measures are the UK Government intending to introduce to rebalance the UK economy geographically? The reality is that the UK—the British state—is the most unequal state in the whole of the European Union.

Photo of Stephen Crabb Stephen Crabb The Parliamentary Under-Secretary of State for Wales, Government Whip

With the significant action of the UK Government to rebalance the economy geographically, we recognise the specific needs of peripheral areas, of which Wales is one. We recognise the extra assistance that Wales needs, which is exactly what is driving the additional investment that the UK Government are giving to the Welsh Government for broadband roll-out, for example, or the rail electrification projects that we talked about. Those are big capital investments, over and above funding through the Barnett formula, about which the hon. Gentleman likes to speak a lot. That demonstrates the UK Government’s real commitment for Wales to receive a greater-than-proportionate share of capital investment, which reflects the fact that we want to see the economy geographically rebalanced. Our ambition is for Wales to share the benefits of all the UK-side measures we are taking, while also showing that Wales is a great place to invest.

The Committee’s excellent report and today’s debate highlight the importance of attracting inward investment with regard to transport infrastructure, skills and promoting Wales abroad as a brand. The Government are delivering for Wales in all those areas. On transport infrastructure, we have discussed the electrification project on the Great Western main line, but it does not stop there. My hon. Friend Guto Bebb asked about the potential electrification of the north Wales line, which we are actively looking at. We want the business community in north Wales to help to work up the economic case for electrification, and hon. Members should be aware that my right hon. Friend the Secretary of State for Wales hosted an important strategic meeting of business bodies, local government and public agencies in north Wales last Friday. They got their heads around the table to think seriously about how we go about building up the economic case that will hopefully convince the Treasury that north Wales electrification is the right next project for railway infrastructure in Wales.

Further investment in Wales will not come from the Government alone. We need to find ways to accelerate major infrastructure investment further, and I hope to see Welsh projects bidding for and benefitting from the £50 billion UK guarantees scheme that we introduced.

In the important area of skills, it is vital that we do all that we can to enhance the skills of the work force in Wales. Wales has a lot to offer, but further up-skilling of the work force will not only attract more inward investment, but support indigenous business. It is excellent that the big companies in Wales such as Airbus continue to run their effective apprenticeship programmes, and the UK Government certainly put a lot of emphasis on increasing the number of apprenticeships. Welsh Government Ministers are also looking at the importance of apprenticeships in Wales.

Higher education institutions in Wales have a world-class track record, as my hon. Friend the Member for Ceredigion touched on in his important contribution, and the reputation of the Welsh HE sector is recognised around the world. Members might be aware that, in Wales, there is a higher proportion of foreign students among the total number of students than in Scotland or in England. Our higher education institutions are also working with several of our major inward investors. I very much welcome the news that Swansea university will team up with BP and Tata Steel to create an energy safety research institute, which was mentioned by Geraint Davies. Tata Steel is also working in partnership with a number of other Welsh universities to develop a project supported by the Engineering and Physical Sciences Research Council and the Technology Strategy Board.

Photo of Geraint Davies Geraint Davies Parliamentary Assembly of the Council of Europe (Substitute Member)

On the Minister’s slightly earlier point about foreign connections and foreign students, does he agree that most foreign students from places such as India and China have links? Their parents have businesses and so on, so there are opportunities for both inward investment and tourism. When his colleagues in government consider visas for tourists and so on, will he urge them to have due cognisance of prospective inward investors and links to valuable commercial networks in emerging markets?

Photo of Stephen Crabb Stephen Crabb The Parliamentary Under-Secretary of State for Wales, Government Whip

The hon. Gentleman makes an important point. We as a Government were elected with a mandate to bring down immigration into this country, but we recognise the importance of foreign students to the UK. We do not want anything to diminish that, but they must be bona fide students at bona fide institutions studying for real degrees.

When I have had the opportunity to travel overseas—I was in Africa this year—I have been impressed by the people I have met who have master’s degrees or PhDs from Welsh universities, some of whom have been Ministers in foreign Governments. The Finance Minister of Sierra Leone, whom I had the privilege of meeting this summer, has a degree from a Welsh university. There are Ministers in Rwanda who studied at Welsh universities. We have a great track record, and that means that we have a network of relationships around the world with people in significant positions. If we leverage those relationships correctly, that should help to create export opportunities for Welsh companies.

It is vital that Welsh universities forge partnerships with the private sector. Only last week, my right hon. Friend the Secretary of State for Wales and my fellow Wales Office Minister, Baroness Randerson, met Welsh higher education institutions. We put private sector partnerships and promoting Welsh higher education institutions abroad at the top of their agenda.

On promoting Wales abroad, I believe that this Government’s investment will ensure that Wales can continue to offer inward investors a world-class package based on high-quality infrastructure, a skilled work force and HE institutions with the knowledge to convert innovation into commercialised solutions. Through the global brand of UKTI, that package is being marketed around the world. One key theme running through the Committee’s report is the need for the Welsh Government to develop the brand of Wales. I believe that that can be achieved by working with the UKTI, and I am pleased to report progress.

UKTI is supporting the Welsh Government’s efforts by sharing access to its overseas network and national inward investment services. I am delighted that UKTI’s relationship with the Welsh Government has been strengthened through a joint memorandum of understanding that clearly sets out the responsibilities of the Welsh Government and UKTI on co-operative working and information sharing. Several hon. Members mentioned that one member of UKTI personnel is embedded with the Welsh Government, but actually two key UKTI officials have been seconded to work with the Welsh Government to ensure that the Welsh offer is as strong as possible and that the Welsh Government sector teams are linked into the UKTI sector teams. Through the work of Lord Green and UKTI’s chief executive, Nick Baird, the Government strongly support that key working relationship with the Welsh Government. The ability to draw on UKTI’s global reach is critical in promoting the Wales brand.

The work of the Wales Office is also vital. Since June 2010, we have met and made representations to delegations from Taiwan, China, Turkey, Japan and Russia. During this summer’s Olympic games, we held a reception complementing the work of the British Business Embassy and highlighting the benefits of investing in Wales. Afterwards, my right hon. Friend the Secretary of State for Wales met the chief executive and chief operating officers of the UK India Business Council to promote Wales as a location for inward investment from one of the world’s fastest growing economies. Earlier this year, the previous Secretary of State also visited south-east Asia to promote trade, tourism and governmental links, as well as opening the new UKTI office in Cambodia and signing a $10 million contract between the Thai Treasury and the Royal Mint.

Several hon. Members talked about the decline in the number of inward investment projects in Wales in recent years. Last year was particularly disappointing, as I think we all recognise. Early reports from UKTI suggest that 2012-13 will be a better year for inward investment in Wales. This year’s figures are much improved from the same time last year: 27 foreign investment projects have been recorded to date, including a £36 million investment by the American-owned automotive company Meritor, as well as the £7 million investment by a Turkish manufacturing company in Cardiff. However, there is obviously still much more to do. Closer working between the UK Government, UKTI and the Welsh Government is essential so that best practice is shared and to ensure that Wales is effectively marketed as an ideal location for inward investment. The Wales Office ministerial team is committed to achieving that.

Our debate included a wide-ranging contribution from the hon. Member for Swansea West, who made numerous good points. He also discussed public sector job cuts in Wales, and I would like to come back to him on one point. Private sector job growth in Wales during the past two and a half years far outstrips the decline in the number of public sector jobs, as an estimated 60,000 new private sector jobs have been created in Wales since this Government was formed. We should back the private sector in Wales and have more faith in it. Yes, times of austerity and difficult decisions about public finances make this a more challenging environment in which to achieve economic growth, but we should have faith that Welsh companies can go out there, grow their businesses and jobs in Wales, and take our economy forward.

Photo of Geraint Davies Geraint Davies Parliamentary Assembly of the Council of Europe (Substitute Member)

The Minister is probably aware that Hewlett-Packard is the biggest computer company in the world and that its two hubs are in Swansea and Bristol. HP is currently bidding for a contract with the Department for Transport relating to contracted-out financial work and back-room work. HP supports a major skilled computing cluster in south Wales. Will he bear that in mind, and perhaps talk with the Department for Transport about its valuation of whether to bring in a German company or use one that provides an enormous skills base in south Wales? It is a factor that should be borne in mind. I appreciate that the Department must make rational decisions about cost-effectiveness, but strategic considerations should also be taken into account. I feel that the public sector and the Government should do everything that they can to encourage local indigenous private sector job growth.

Photo of Stephen Crabb Stephen Crabb The Parliamentary Under-Secretary of State for Wales, Government Whip

I thank the hon. Gentleman for his remarks. I will follow that up outside this debate.

My hon. Friend the Member for Ceredigion spoke powerfully about the role of the knowledge economy, mentioning the important work being done at Aberystwyth university and the potential of that university and all the Welsh HE sector to attract inward investment. I encourage him to speak to my hon. Friend George Freeman, who has been appointed by the Prime Minister as this Government’s life sciences representative and who is developing an exciting strategy that he wants to be UK-wide for developing the life sciences sector in this country and bringing in new investment through that route.

The hon. Member for Clwyd South was the first Member to mention Cardiff airport. Wales deserves and needs a growing, thriving, attractive airport to welcome inward investors. I think that we all share the concern of the First Minister and his team that Cardiff airport is underperforming. I leave the hon. Lady in no doubt about the priority that the Wales Office places on the issue. We will be holding discussions with Ministers at the Department for Transport and in Cardiff.

I thank Members for their contributions. There are reasons for us all to be positive about inward investment in Wales. It is vital that we continue to attract new investment to drive economic growth. The challenge that we face is to continue to develop Wales’s fantastic offer and to take every opportunity to promote it in the ever-increasing global market. We talked a lot about the role played by UKTI and Welsh and UK Ministers, but we can all play a role. Lord Green, the Minister responsible for inward investment and exports overseas, says that he wants to hear from individual Members of Parliament from all parties about companies in their constituencies that should be linking up with our trade missions.

There is a role for us all in speaking to firms in our constituencies that are looking for export opportunities overseas. There might be initiatives and projects that could host greater inward investment. There is a challenge for all Members of Parliament to fit in with the programme that is being developed UK-wide and at Welsh Government level. I hope that we can all play our part in attracting new inward investment to Wales and driving forward economic growth.

Photo of David Davies David Davies Chair, Welsh Affairs Committee 4:00 pm, 29th November 2012

I will be brief. I thank all hon. Members who have taken part in our debate and prioritised Wales over the other matter that is going on down the road to do with Lord Justice Leveson.

I thank Geraint Davies for his wide-ranging contribution. I look forward to discussing my figures on debt deficit that I obtained from the Library and to working out why it believes that the Government spent £250 billion and added that to the national debt before the financial crisis struck, when he said something different. That will be interesting.

I thank Jonathan Edwards for sharing the details of his honeymoon with us and for lifting my heart. He told us that the Assembly’s Treasury Minister had been outfoxed by the UK Government and that the borrowing powers were so small that they would have barely enough for a packet of crisps. I have been extremely worried about that, but I find myself strangely reassured by his comments.

Mr Williams was kind enough to thank me for choosing relevant inquiries on the Welsh Affairs Committee, but unfortunately my timing was not so good. He did us all a favour by suggesting the inquiry into connectivity, particularly how it affects his constituency in west Wales. He then built on that by suggesting that we all went to Aberystwyth by train and arranging for the train company to institute long delays so that he did not arrive until several hours after he was meant to as a result of the train service that his constituents receive, thereby making the point very well that things need to improve.

Susan Elan Jones was an extremely hard-working and diligent member of the Committee, and she has now been promoted. It is wonderful that so many members of the Welsh Affairs Committee are promoted to the Front Bench. I await my call and look forward to that happening more widely. In fact, I do not want a job at the moment, because the Minister is doing extremely well and working very hard. I know because I have seen him on constituency visits. I congratulate him and the other Minister. I look forward to working with them, as does all the Committee, and look forward to hearing them give evidence to the Committee.

Question put and agreed to.

Sitting adjourned.