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Public Expenditure (Wales)

3.31 pm

The Secretary of State for Wales (Mr. William Hague): With permission, Madam Speaker, I should like to make a statement on public expenditure in Wales. Copies of my statement, provisional standard spending assessments, my proposals for a council tax damping scheme, provisional capping principles and notional amounts for local authorities are available in the Vote Office. Full details of my decisions will be published in due course. [Interruption.]

Madam Speaker: Order. Hon. Members are having difficulty hearing. Will those who are leaving please do so quietly now? We have business to conduct here.

Mr. Hague: Thank you, Madam Speaker.

Next year, the Welsh Office will have its biggest budget ever, at £6.9 billion. That is £100 million more than the budget for this year and £70 million more than the original plans. Provision for Wales is reached through the block and formula arrangements. For this survey, the consequentials from local government revenue provision in England have been calculated on the basis of total standard spending rather than aggregate external finance. That is essentially a technical change, but it brings significant benefits to the Welsh block.

I intend to make the money available go even further next year by making the most of the private finance initiative. Six deals have already been signed, with a total capital value of £25 million, and more are in the pipeline. In all, we hope to generate capital spending of around £350 million through the PFI over the next three years.

I am making available £0.5 million to assist local authorities in developing a range of pathfinder PFI projects, and I have asked the Higher and Further Education Funding Councils to look at the scope for providing similar assistance in their sphere.

The Welsh Office will operate efficiently and at minimum cost. Over the next three years, the costs of running the Welsh Office will fall by more than 8 per cent. I am requiring all non-departmental public bodies in Wales to make efficiency savings in their running costs too, releasing overall savings next year of about £1.5 million.

The decisions that I am presenting today are clear choices that build on success. My aim is to increase personal prosperity and to improve quality of life. I am therefore making health, jobs and education my priorities, even though that means reductions in some other programmes.

In my statement last year, I increased health spending in Wales for the current year by £84 million. Today I am announcing an additional £94 million for next year, an increase over this year's plans of more than 4 per cent. Health spending in Wales is 14 per cent. more per head than in England. This is a very good settlement for health authorities and trusts, but I look to them to continue to make efficiency savings and to drive down costs--particularly management costs--so that the savings can be transferred to patient care.

Health service capital expenditure of £40 million is going through the PFI process at the moment. I can also announce today a package of conventionally funded

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schemes worth more than £55 million, including £31 million for the provision of a new accident and emergency service and other developments at the University hospital of Wales; £20 million, subject to health authority support for the business case, for a cancer centre in north Wales; and £4 million for a medium secure unit also in north Wales.

The total amount available for training next year will be £136 million, about the same as the expected spend this year. Our aim is to equip Wales with the skills needed for the record-breaking number of jobs now being created. I am increasing provision for modern apprenticeships to £27 million, an increase over spending this year of nearly £12 million--more than 75 per cent.--allowing a further 4,300 young people to begin modern apprenticeships.

Some £2.8 million will be available for adult technicians, which is more than twice as much as provided this year. Support for careers service companies will increase by 18 per cent. on this year's spending. To accommodate those increases, we will have to cut back elsewhere. Against a background of falling unemployment, there will be a reduction in the training for work programme.

In addition to the provision I am making available through standard spending assessments for local authorities, I am providing directly £566 million for education in Wales. This includes £177 million for further education and £237 million for higher education through the funding councils. Total capital provision for schools will be £68 million, including £9 million for the popular schools initiative; £5.5 million for schools projects under capital challenge; and £1 million for the technology schools initiative. Together with the increase of more than 20 per cent. in the past two years, that brings the level of capital provision to its highest ever for schools in Wales.

In giving extra money to some areas, I must give less to others. The central Government roads programme will be reduced next year to £113 million. The first priority is the maintenance of the existing network, but work will also continue on three schemes starting this financial year--the A40 Carmarthen eastern bypass, the A4060 Mountain Hare to Dowlais, and the A55 Waen to Pont Dafydd. Work will start next year on the A470 between Dolwyddelan and Pont Afanc. Work will continue on the proposed PFI schemes--notably the A55 dualling across Anglesey--and on a programme of important structural renewal, including the reconstruction of the A449 between Usk and Newport.

I am also reducing net capital provision for Housing for Wales next year to £60 million. That will support a gross investment programme by housing associations of well over £100 million and will provide around 3,000 new dwellings next year. It will be provided on top of gross investment of more than £1.4 billion since Housing for Wales was set up in 1989. The social housing grant will be set at 56 per cent, which represents a generous level of support and maintains downward pressure on rent levels.

I am providing £215 million for local authority housing. That includes £164 million for private sector housing renovation, incorporating £14 million of challenge funding for area renewal. It will bring total investment in private housing renovation to more than £1.1 billion since 1990. To encourage the transfer of housing stock to local housing companies or housing associations, I am introducing a three-year holiday from the 20 per cent. levy

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on capital receipts and a guarantee that local authorities can use 25 per cent. of receipts to spend on housing. In all, I propose to make £443 million available to local authorities for capital expenditure next year, including the provision for schools and housing that I have already detailed.

While next year's local authority capital settlement is a reduction on this year's level, I have been careful to protect schools--a priority--and local authority capital provision next year will still be very considerable. In fact, per head of population, it will be two and a half times that for England.

I am providing more than £76 million next year for local authority roads. That includes provision of nearly £54 million for transport grant schemes to meet the estimated costs of committed schemes.

I am also providing initial funding for the design costs associated with five new schemes, although future funding depends on new arrangements being agreed by local authorities to avoid their cost overruns, which have caused serious problems in recent years. These schemes concern the Tredegar Park interchange, the Port Talbot peripheral distributor road, the Church Village bypass, the Wrexham industrial estate, and the Ceredigion link roads.

The £39 million available for capital and revenue under the strategic development scheme will fund all forward commitments in the next year and an allocation of £11.6 million, which authorities can decide for themselves how to use.

I am announcing today projects with a total value of £32.6 million to be supported under the new Welsh capital challenge. Allocations for next year will total £20 million. As well as the schools projects that I have already mentioned, this innovative approach will support a wide range of projects to help create or safeguard 1,200 jobs and, in partnership with the private sector, provide further employment opportunities. These include industrial parks in Anglesey and Carmarthen and tourist developments in Llandudno and Porthcawl.

The reductions of which I have spoken will allow us to increase spending in other areas on top of the huge rise in health spending that I have already announced.

For local authority revenue spending, I propose to set aggregate external finance, AEF, at £2,578 million--up £64 million or 2.6 per cent. That is £884 for every person in Wales, over f150 more than in England. I propose to set total standard spending for next year at £2,931 million, which is 2.3 per cent. up on this year, and includes £169 million for community care and £341 million for police authorities. The police settlement is up 2.7 per cent., and builds on increases in the past two years of five per cent. and 11 per cent. respectively.

With that level of support, there is no reason for the average increase in Welsh council tax to be any higher than that in England; and the large difference between English and Welsh council tax levels will continue to be at least as great as last year. These decisions, though, are for local and police authorities to take bearing in mind the impact on council tax payers. They should certainly not view capping limits--which I will come to in a moment--as a target. They are a ceiling.

I propose to continue damping, and within AEF I am making £18.3 million available so that the maximum increase in council tax in Wales should be no more than

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15 per cent., excluding community council precepts and the cost of discretionary non-domestic rate relief. The majority of increases will be capped well below that level.

For next year, I propose that a local authority's budget should be considered excessive if it exceeds its standard spending assessment by 12.5 per cent. or involves an increase over its base budget for this year of more than 1.8 per cent., or more than the cash increase in its SSA, whichever is greater. I shall consult local government in Wales on the basis for my capping and damping proposals.

These principles are provisional. Actual principles will not be set until local and police authorities have set their budgets for next year. My Department is writing to Welsh local authorities notifying them of their provisional SSAs.

Budgets for the national library and the national museums and galleries of Wales will be held constant next year, as will those of the Sports Council, the Wales tourist board and CADW.

The budget for the Arts Council for Wales will rise to £14.5 million, which will enable it to maintain its current level of support for the arts in Wales and reorganise its senior management structure. It will also provide £0.5 million over the next three years to support dance and drama students.

The Welsh Language Board will receive a significant increase, bringing its budget next year to £3.7 million, enabling it to discharge its new responsibilities of grant-aiding the four major Welsh language organisations.

I am providing £23.2 million for the Countryside Council for Wales, an increase of £1.2 million over this year. That comes on top of last year's large increase and the additional funds that I have made available in-year to address the consequences of the Sea Empress spillage.

Agriculture forms part of the Welsh Office budget, although it is not part of the block. Domestic expenditure on agriculture in Wales will be £66 million, an increase of £8 million over this year's spending. Taken with £192 million from the European Union, total provision next year will be £258 million. While that is less than the present year, it is mainly due to the revaluation of the green pound. We are increasing the hill livestock compensatory allowance rates for cattle by 105 per cent. and 194 per cent., and are maintaining the rates for sheep. Otherwise, provision for bovine spongiform encephalopathy is additional to the resources that I am announcing today for Wales, since it is dealt with on a UK basis, but Welsh farmers are benefiting from £3.3 billion of Government support to maintain the industry as a whole.

My top priority is the creation of a vibrant economy in Wales, in which the economic development agencies in Wales will continue to play a major part. Cardiff Bay development corporation will spend £53 million next year on the barrage, reclamation and development, thus attracting more private investment.

The gross budget of the Development Board for Rural Wales next year will be more than £20 million, which matches this year's spending. I have asked it to focus inward investment support on the western part of its area.

During this year, I have added £25 million to the Welsh Development Agency budget. I am adding a further £20 million for next year, which takes its grant in aid to £85 million, and the gross provision to £150 million.

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The settlement will allow the agency to accommodate additional expenditure arising from the Lucky Goldstar project, and to continue its wide range of other programmes. Our success with LG has been spectacular, but I do not want resources to be concentrated in south-east Wales at the expense of other areas. I therefore want the agency, with the Land Authority for Wales, to prepare key strategic investment sites across Wales.

This year has been a tremendous year for inward investment. More than 130 projects have been secured. Those projects promise to create more than 15,000 new jobs, and generate capital investment of more than £2.4 billion.

The regional selective assistance budget next year will be the biggest ever at £70 million--27 per cent. more than this year. That demonstrates our commitment to bringing new jobs to Wales, and through that and other industry support schemes, we are helping Welsh companies to take advantage of our record inward investments.

Taken together, the measures that I have announced today provide for economic development of more than £300 million next year. That is a 14 per cent. increase on planned spending for this year, and represents a huge investment in the future of Wales.

I have set before the House my clear priorities. They are clear choices, and to do anything else would compromise the successes of recent years. What we propose now will build on those successes.

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