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Parliamentary Currency Commission

Mr. Michael Fabricant accordingly presented a Bill to establish a commission, chaired by a law lord, to examine and report to Parliament and to the public on future currency arrangements for the United Kingdom, including consideration of the options of retaining sterling, adopting the European Single Currency, or adopting the United States dollar: And the same was read the First time; and ordered to be read a Second time on Friday 3 July, and to be printed [Bill 115].

3 Feb 1998 : Column 863

Orders of the Day

Government of Wales Bill

[5th Allotted Day]

Considered in Committee [Progress, 2 February].

[Mr. Michael Lord in the Chair]

Clause 80

Grants to Assembly

4.39 pm

Mr. Richard Livsey (Brecon and Radnorshire): I beg to move amendment No. 387, in page 38, line 28, leave out from 'Parliament' to end of line 29.

The Second Deputy Chairman of Ways and Means (Mr. Michael Lord): With this, it will be convenient to discuss the following amendments: No. 369, in page 38, line 29, at end insert

', and the totality in any financial year of such amounts shall be no less than a totality produced by the application of the Barnett Formula.
(1A) In this section "Barnett Formula" means the non-statutory mechanism for calculating, on the basis of proportions of population, the equivalent changes to the budgets of the territorial departments following changes to programmes and budgets in England.'.

No. 388, in page 38, line 29, at end insert--

'(1A) The amount of money referred to in subsection (1) shall be the current block grant as determined on the basis of the Barnett Formula for the first full year of the Parliament's operation commencing on 1 April 2000.
(1B) Adjustments to the Barnett Formula to take account of population changes shall be made following the publication of census and mid-census population figures.
(1C) In this Act "Barnett Formula" means the non-statutory mechanism for calculating on the basis of proportions of population, the equivalent changes to the budgets of the territorial departments following changes to programmes and budgets in England.
(1D) The Assembly and Parliament shall conduct a joint review of the funding formula for the Assembly for implementation in the tenth year following the establishment of the Assembly.'.

No. 371, in page 38, line 31, after 'Assembly', insert

'out of money provided by Parliament'.

No. 18, in page 38, line 32, at end insert--

'(3) No payment may be made under this section until the Secretary of State, Minister or government department (as the case may be) has laid before the House of Commons a statement certifying that the payment is based on the needs of Wales in relation to the United Kingdom as a whole.'.

No. 435, in page 38, line 32, at end insert--

'(3) In determining the amounts of payments made under this section, Ministers of the Crown shall have regard to objective indicators concerning Wales, which shall include--
(a) Gross Domestic Product per head as a percentage of the average for the United Kingdom,
(b) indicators of relative deprivation, and
(c) an indicator of the divergence of sparsity of population from the average sparsity of population for the United Kingdom.'.

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No. 438, in clause 81, page 39, line 18, at end insert--

'(4A) The statement shall include details of the arrangements referred to in section 80(3).'.

Mr. Livsey: Amendment No. 387 removes the words

but permits the Secretary of State to make payments to the assembly. It paves the way for amendment No. 388, which represents the input and impact that Liberal Democrats seek.

The purpose of the amendments is to put the Barnett formula into the debate on the assembly and how the assembly should be financed. They seek to remove the Secretary of State's flexibility in determining payments to the assembly. Clause 80 uses the phrases "from time to time" and

That does not provide a concrete funding formula on which the assembly can develop long-term funding plans.

The Barnett formula has been used for Wales since 1980. The fact that it has been used for almost 20 years is an indication of its success and widespread acceptance as an adequate solution to the problem of funding Wales and Scotland to take account of the particular needs of those countries. The Barnett formula has tended to preserve higher expenditure per capita in Wales than in England. That is important because the cost of providing many services in Wales is much higher than in England. Although that is largely due to the sparsity of population in mid-Wales and north Wales, it is also due to quite high levels of social deprivation in south Wales and other parts of the country. That will not change when the assembly begins its work, so its budget should be based on the same principles as now.

The Barnett formula is non-statutory. Our amendments would provide a statutory basis for securing its principles, which, of course, relate to the annual change. Amendment No. 388, however, recognises that the formula may not be the most appropriate long-term solution to the problem of funding Scotland and Wales. Perhaps some of us would prefer even higher funding, given the low level of gross domestic product that Wales has achieved, particularly over the past 10 years. Proposed subsection (1D) therefore includes provisions for a joint review of the funding formula after the assembly has existed for 10 years.

Page 25 of the White Paper states that the present arrangement for deciding the size of the budget allocated to Wales will be retained. Our amendments seek to include that commitment in the Bill, so that it is quite clear from where funding for Wales is derived.

We also support amendments Nos. 435 and 438, which would allow the particular problems of deprivation and sparsity of population in Wales to be considered when the assembly's budget is determined. As an hon. Member who represents a rural constituency, I know only too well the problems of population sparsity and the importance of achieving a fair settlement on sparsity factors. One has only to consider local education authority school transport bills, for example, to realise the enormity of the problem. I have great pleasure in commending the amendments to the Committee.

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4.45 pm

Mr. Denzil Davies (Llanelli): I shall speak to amendments Nos. 369 and 371, which are in my name and the name of my hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands). Amendment No. 369 deals with the Barnett formula, and I shall return to it later.

I should mention to the Under-Secretary of State for Wales, my hon. Friend the Member for Neath (Mr. Hain), that amendment No. 371 is a probing amendment to clarify what is meant by clause 80(2), under which, apparently, any Minister of the Crown will be able to make payments to the assembly. Apparently, those payments will not specifically be from money provided by Parliament. What payments are envisaged and why are they not from money provided by Parliament? I suspect that such payments would have been from money provided by Parliament before the transfer.

The hon. Member for Brecon and Radnorshire (Mr. Livsey) explained the Barnett formula. Given that--I think--we are all well aware of its intricacies and details, I shall not have to try to explain it again either to myself or to anybody else. There is a magical figure of 6.02 somewhere or other, which is supposed to indicate the relationship between the populations of Wales and England. The figure is higher than it would otherwise be, which means that any increase in the block grant for the Welsh Office is slightly greater than the corresponding increase for England. Conversely, of course, if there is a decrease, the resulting decrease is greater. We shall, therefore, lose out if there are reductions in expenditure.

I have no doubt that the Minister will give a number of reasons why the Barnett formula should not be incorporated into the Bill. We shall be told that the Barnett formula covers only the block grant to the Welsh Office and not other expenditure in Wales. For example, about 8 or 9 per cent. of total United Kingdom social security expenditure, including income support and spending on disability, is spent in Wales. That is higher than the percentage of the United Kingdom population who live in Wales and higher than the figure in the Barnett formula, which shows--I say this as an aside--how dependent Wales is on those social security payments.

It will be argued that there is no need to include the Barnett formula in the Bill because the Government say--I entirely accept their statements--that they have no intention of changing it. Another argument against the formula's inclusion is that no Parliament can bind another Parliament.

I broadly accept those arguments--there may be others--but the Barnett formula is all that we have. My hon. Friend the Minister looks as though he agrees with me. If he wants to introduce a better and more sophisticated system, we shall accept it. I accept that this Parliament cannot bind its successors, but it is better that such provisions are included in a Bill than in an order or Government statement. If there is nothing better on offer, the Barnett formula should be entrenched in the Bill.

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Last week, I think, my hon. Friend the Member for Cardiff, West (Mr. Morgan) rightly said that a scheme of devolution needs both a dispute resolution procedure and a resource allocation system.

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