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Mr. Alan Williams (Swansea, West): Does the Secretary of State agree that the figures that he has announced today and those in the Red Book indicate that, in real terms, we will have a cut of £590 million in Government funding for Wales in the next three years? Since it is implicit in what he says that none of those cuts will be in health services, does it not automatically follow that £590 million of cuts will have to be met in other services? Since education is the major cost for local authorities, how on earth does he think that efficiency gains will enable local authorities to absorb cuts of that scale?

Mr. Hague: I have been straightforward in setting out how increases in some areas will require reductions in others. Reductions will be needed in the coming year in the roads programme and in total local authority capital spending--although not in schools--to accommodate increases elsewhere. The right hon. Gentleman is right to think that we have to make a trade-off. Unfortunately, it is a recognition that is not shared by his colleagues on the Labour Front Bench.

In the longer term, the Government are committed to reducing the proportion of gross domestic product spent by the state. That means that we have to get more out of public expenditure and the majority of Departments have published in the survey plans that will imply reductions in real terms over a long period. We have added to the plans of the Welsh Office in this survey, and plans for future years will be revisited in future years.

Mr. Ieuan Wyn Jones (Ynys Mon): Given that the Secretary of State has announced capping of 1.8 per cent. on local government spending over last year, that we face inflation of 2.7 per cent. and that local authorities need to take into account pay increases for teachers, increases in fire authority budgets and increases as a result of their new statutory responsibilities under the landfill tax, does the right hon. Gentleman recognise that the proposed settlements for local authorities will inevitably mean cuts in many of their services?

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Given that the education budget accounts for almost half of local authority spending, does he not recognise that those cuts will put 1,000 teacher's jobs at risk in Wales and make class sizes much larger? Does he not recognise that social services will also be badly hit? How can he say that this is a good settlement for local authorities in Wales?

Mr. Hague: The hon. Gentleman should not be misled by the 1.8 per cent. The way in which capping works is complicated, but I said a 1.8 per cent. increase or the increase in the standard spending assessment, whichever is the greater. In many cases, that will be greater than that 1.8 per cent. figure.

The key figures are that the support that central Government are giving to local government will increase in this settlement by 2.6 per cent., which is a £64 million increase. That is about the current rate of inflation, and more than the forecast rate for the coming year. Local authorities have to learn to live within settlements that are around about the rate of inflation. The laws of economics are not suspended for local authorities, and they should be able to deliver their services without reducing them with settlements that provide them with an increase in line with the rate of inflation.

Mr. Nick Ainger (Pembroke): Does the Secretary of State accept that the figures that he has announced for the health service--a 4 per cent. increase on the plans for this year compared with next year--represent a real-terms cut because of the substantial non-recurrent expenditure that has taken place this year? In fact, the figure is far below 4 per cent. and he is not honouring his claim that there would be year-on-year increases in the health service.

Can the right hon. Gentleman also confirm that council tax payers will be faced with substantial rises while at the same time there will be substantial cuts, particularly in the education provided in our schools and in the social services provided to those in our community who need them? There may well be threats throughout Wales to residential homes provided by local councils. Can he also tell us why, despite the delegations from south-west Wales that have seen him about the need to improve communications to that area, he has made no announcement about improvements to the roads leading from the A40 to Pembroke Dock and Fishguard?

Mr. Hague: There were several questions there. On health spending, we have to compare like with like. I am comparing the plans at this point with the plans last year. Of course, there are often changes in year, but there will no doubt be changes in year in future years as well. I am adding £94 million compared to last year's spending plans.

Local authorities are receiving in total an extra £64 million. If Opposition Members think that the increase in the money we give to local authorities should be more than £64 million in the coming year, they need to come to the debate that we will hold next January or February on the local government settlement and say what the amount ought to be. They have to bear in it mind that that means either a higher level of spending or reductions in other programmes, neither of which they seem prepared to admit to advocating. That is what they have to face up to.

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I have explained that I think that the other areas to which I have chosen to direct increased resources in the coming year are higher priorities than the roads programme. I am certain that the health service, the promotion of jobs and modern apprenticeships, and capital spending on schools are higher priorities; other people may disagree, but I am convinced that that is the right judgment.

Mr. Paul Flynn (Newport, West): The governor-general has claimed that he is fulfilling the political priorities of the people of Wales. How is he doing that by taking even more money from our least-favoured schools with the most problems and giving it to our most-favoured schools with the fewest problems, by trying to impose grant-maintained status, which was rejected by my constituents by an 87 per cent. majority in a recent poll, and by trying to impose on Wales an unwanted nursery vouchers system, when the Government's survey of popular opinion in Wales found that 5,000 people were against it and only one person in favour? Are not the Secretary of State's educational priorities alien, irrelevant and damaging to Wales?

Mr. Hague: The hon. Gentleman has not understood that choice and diversity in education improve educational opportunity for everyone. That is demonstrated by the improved performance of our schools over the past year. He has not noticed that nursery vouchers are bringing additional resources of between £4 million and £5 million into nursery education in Wales.

The hon. Gentleman asks how I know what the priorities of people in Wales are. I have noticed that the one thing that nobody in Wales ever stops me in the street and asks me to spend more money on is setting up an assembly full of politicians wasting their time in Cardiff.

Mr. Alan W. Williams (Carmarthen): I welcome the Secretary of State's comments on the Carmarthen eastern bypass, and I am pleased that it is going ahead and will not involve the private finance initiative. More generally, however, he dressed up the statement as representing growth here and increases there, but that belies numerous cuts in highways, housing and other areas. Is not the summary of his statement given in the first paragraph, which says that the budget of £6.9 billion is £100 million more than this year's? That is an increase of only 1.4 per cent., at a time when inflation is at 2.7 per cent. Is that not in truth a cut of 1 per cent. in what the Welsh Office is doing for the economy of Wales?

Mr. Hague: I thank the hon. Gentleman for his welcome for my remarks about the Carmarthen eastern bypass. He said that the statement was dressed up as increases and growth everywhere, but that is not the case. I explained that I deliberately made increases in some areas, and I said clearly that there will have to be reductions in others. There is no dressing up; there is a clear choice of priorities. We want to increase some things, and to do it we have to reduce others. What has been absent from the debate is any sense among Opposition Members of choosing priorities, because they want to be all things to all people: they want to criticise every reduction and still have every increase.

Dr. Kim Howells (Pontypridd): Is the Secretary of State aware that Rhondda Cynon Taff contains some of

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the hardest hit and poorest communities in Wales? What does he intend to do to scotch the rumours that we will lose hundreds of teaching jobs because the local authority simply will not be able to afford to employ teachers in the future? Those are not bare statistics, but extremely difficult choices that will have to be made. We have heard nothing this afternoon that will give anyone any hope that those awful redundancies will not become a reality.

Mr. Hague: Such stories are given currency by local authorities to reinforce their negotiating position and are then quoted by hon. Members in the House. Today, I have set out a £64 million increase in the amount that the Government will give to local authorities next year. It will be distributed among them according to the formula that is agreed with them. If Opposition Members think that the increase should be greater, they will have to say where they would obtain the money.

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