Plaid Cymru the Party of Wales Manifesto

Plaid Cymru - The Party of Wales Manifesto 2001

Part 1
Wales today and the need for change

Analysis of the economic and political background to the election

Section A
Economy and society under pressure: the effects of the policies of the past twenty years

Wales today is paying a high price for the economic policies that have guided UK governments over the past twenty years.

Trends of many years are not easily reversed, but pressing the British government to change economic direction so as to release Wales's potential will be one of Plaid Cymru's main priorities in the next parliament.

The election occurs at a time when Britain's big parties have moved to the right. As new Labour has decided that attracting the support of the urban middle class is its priority - in southern England mainly - it has gradually turned its back on the basic principle of redistributing wealth. It has also adopted the values and language of the right, particularly in the case of taxes and public services.

This change in Labour's standpoint has pushed the Tories still further to the right, so that they are now on the periphery of politics, with their agenda of still more tax cuts and their xenophobic attitude towards the growth of European unity.

The fact is that Britain today stands out as one of the most unequal countries in Europe, and this inequality is evident both socially and geographically.

There is a huge gap between regions and social classes, with serious problems of exclusion. This is particularly evident amongst disabled people, ethnic minorities and many women too.

Wales' situation today is a perfect example of this inequity. The gap between Wales and wealthy regions remains, as is the gap between it and the UK average. GDP per head fell from 82.4% to 79.4% of UK average between 1996 and 1998, whilst the latest corresponding figure for London and Southeast England is 116%.

The recent dreadful blows to our steel industry will make the situation even worse.

But Plaid Cymru rejects the idea that Wales is essentially a poor country.

We should remember Wales's key role in the industrial revolution and its huge contribution to the wealth of the British state and its empire.

And yet, after being treated as a mine for material and human resources for nearly two centuries, neglect and lack of investment has been its fate.

In spite of our pioneering contributions in education, the education system has hardly served Wales, concentrating more on providing teachers for England than skills that could have made a difference in Wales.

Although large parts of Wales today are amongst the poorest in Europe, we reject the idea that that is inevitable and immutable.

Think of Ireland, which has succeeded in transforming its economy completely, from being one of the poorest countries in Europe to being now wealthier than the United Kingdom.

The challenge for Wales currently is to take the greatest possible advantage of devolution as an opportunity to start a historic process of planning economic policies and an education system that will put the needs of Wales first.

The Tory Legacy

In order to understand the economic situation in Britain today, we need first to consider the policies pursued by the Conservatives between 1979 and 1997.

One of the most prominent features of Margaret Thatcher's period as Prime Minister was the creation of a climate of suspicion towards public spending, and an obsession with tax cuts.

The Thatcherite revolution involved an attack on some of the essentials of a civilised society, such as people's mutual dependence in their community and the welfare state, insisting that there was no such thing as society.

It was the era of tax cuts for the wealthy, leading to the appalling inequality we find in Britain today. Indeed, by today the poor pay a higher portion of their income in taxes than the rich. Over the past 20 years 20% of homes with the highest income have seen their tax burden diminishing from 37% to 35%, while the bottom 20% have seen their tax burden increase from 31% to 38%.

Economic irresponsibility was the hallmark of government policy in the 1980s, with revenue from the privatisation of large swathes of the economy being used to finance tax cuts rather than investment in the infrastructure for the long term benefit of the economy and society. Squandering North Sea oil revenues was another example of such short-termism. The social scars of the 1980s can be seen on all sides.

One of the worst effects is the extreme contrast between private affluence on the one hand and the poor condition of our public services on the other. In the wake of irresponsible neglect in terms of investing in schools, hospitals, railways and so on, key public services are under serious pressure.

Policy on taxation and expenditure has also had an obvious geographical effect. Low taxes for the well off increases the advantage for areas where income is high by increasing spending capacity.

At the same time reducing public spending disadvantages regions where income is low and where there is a need for investment.

The fact is that cuts in benefit payments and pensions are a blow to areas where a large proportion of people receive them, as well as to the recipients themselves. The constant reduction in the level of the old age pension in comparison with average income has struck Wales particularly hard because we have a higher percentage of pensioners than the UK average.

There is an increasing gap between the different levels of society. A large proportion of society has to toil to subsist on low salaries, and an unemployed or unable-to-work sub-class falls further behind the community at large.

This is particularly evident amongst disabled people, with many failing to gain access to the labour market at all, and also amongst minority ethnic communities where many fill posts beneath their skills levels if indeed they manage to get jobs at all. Women's wages and salaries lag way behind those of men despite thirty years of equal-pay legislation.

Another feature of the 1980s period was the undermining of regional policy, which is to be seen very clearly in the hostile attitude of the Thatcher government towards the use of European regional development moneys.

In particular the Fontainebleau Agreement - the much trumpeted rebate - has been damaging to Wales. As the money that comes from different regional funds to Britain reduces the rebate, government after government had a motive not to use the opportunities for regional aid to their full potential.

As European money means redistribution within Britain as well as within the European Union, governments' attitude towards it has been lukewarm at best; they preferred to keep taxes down.

As keeping taxes down has favoured the more prosperous areas, this has created an increasingly unequal society. The effect has been that resources were transferred gradually over a period of time from Wales and other poorer regions to the wealthy areas, particularly Southeast England.

New Labour Policies

After 18 years of Tory governments, governments which never had the support of the majority of the people of Wales, there were great expectations four years ago that a Labour government would reverse these damaging trends. What happened, however, was that New Labour, in trying to free itself of past images, adopted a large part of the Tory agenda.

To begin with, it committed itself before the election of 1997 to keep to Tory spending levels. The result was that the crises and lack of investment in public services went from bad to worse. It is important to consider the increase in spending in the Comprehensive Spending Review (CSR) of last July in this context.

The fact is that the CSR does not involve a fundamental change in direction. The increase seems great because it rises from such a pitifully low level. The fact is that public spending as a proportion of GDP has been lower under Labour than under the Tories.

In 1999-2000 public spending of 38.3% of GDP was at the lowest level since 1964. Even after the CSR the proposed public spending of 40.5% by 2003 will only just reach what it was in 1990. In the same way, New Labour has refused to reverse the big cuts made by the Tories to taxes upon the richest.

New Labour also stands condemned for its spin and continual double-counting, in order to create an impression that additional investment is being made. Since they have come to power announcements about additional spending on the health services and education have flowed thick and fast in order to mislead the public to believe that each announcement refers to new money. This has been completely irresponsible as it has created serious cynicism amongst the population regarding the political process.

Support for the Private Finance Initiative (PFI) is an example of the present government's misgivings about public spending - in spite of evidence that shows the PFI to be bureaucratically costly, and more expensive in the long term. It is also a disadvantage to poorer areas as it tends to suck jobs, profit and power from local economies.

A clear indication of how New Labour has turned its back on its roots is the fact that neither unemployment levels nor the benefit of different regions of the United Kingdom were among the criteria for setting interest rates when the responsibility was transferred to the Bank of England's monetary policy committee soon after the last election. Once again, this has been a big blow for Wales. The obsession with keeping income tax low leads to the need to use interest rates as a means of controlling inflation. As well as the fact that many companies, particularly in Wales, are particularly debt-dependent, it leads to a rise in the level of the pound. This has punished Welsh businesses particularly badly as agriculture and manufacturing are so important to our economy.

The attitude towards European Regional Funds remains lukewarm at best. Britain has argued strongly against increasing the total resources for them, and is continuing to refuse to operate the additionality principle fully. Although the extra 421 million in the CSR for the European programmes is a step ahead and verifies Plaid's arguments, it is much less than what Wales is entitled to. In the same way, the complete lack of match funding is a clear sign of continued lack of commitment by the British government to the principle of regional redistribution.

So the truth is that the current Labour Government has neither re-ordered priorities nor changed policy direction in any significant way. New Labour leaders have acknowledged that redistribution of wealth is not one of their policy aims, and this is confirmed by their actions.

The gap between the richest and the poorest has also increased more in Labour's first two years than in the Tories' last two years. Britain has the worst record on child poverty in the developed world. While setting a minimum wage is a step forward, restricting benefits for disabled people and pensioners has been especially cruel. So also the deplorable delays in paying compensation to coal miners, most of whom have given lifelong loyalty to Labour.

What is unforgivable is that all these things are happening at a time when technological developments have generated major growth in the economy. The Party of Wales' message is that everybody should have a share of the benefit that has come from this.

The Barnett Formula

Over the last years it has become increasingly evident that there are basic weaknesses in the way Wales is funded. This is clearly seen in the Barnett Formula, as a system based totally on population numbers is very unjust towards Wales. This is because it was devised in the late 70s, before the decline of heavy industry and the terrible effects of this on income levels and jobs.

Since then, many factors have been at work which mean that Wales's circumstances, as compared with the rest of the United Kingdom, have deteriorated.

Firstly social problems, dependency on benefits and social services, and ill-health have increased substantially in Wales since 1979. Also, partly because of the emigration of the young and economically active and partly because of people moving here to retire, the average age in Wales is higher, which in turn puts pressure on health and social services.

Another problem is that the Barnett formula has been designed so as to converge with spending levels in England, which means that is impossible for Wales to emulate every policy improvement and innovation that occurs in England. The need for an early review of the Barnett formula is therefore a key demand by Plaid Cymru in this election. This is coupled with a call for the establishment of a regional development policy to spread prosperity within the countries of Britain.

This is not asking for charity, but demanding justice. The fact is that the mechanism offered by a regional policy is necessary to compensate for the effect of a single currency, an open market and a common interest level. And it is absolutely fair to demand compensation for the macroeconomic and investment policies that have favoured the prosperous regions of Britain over the past 20 years and more.

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