THE
RT HON
RON DAVIES,
MP, DR
EMYR ROBERTS,
MRS JOANNA
JORDAN and MR
RICHARD CLARKE
Chairman
1. Good morning, Secretary of State. It
is enormously good of you to come. As you know, we are discussing
your departmental report for 1998. I would like to start by asking
a few general questions. What do you see as the purpose of the
departmental report and how much importance do you attach to it?
(Mr Davies) I certainly attach a great deal to
it. What it does is to reflect the priorities that we have identified
during the last 12 months since the general election. Perhaps
I should say that during the last 12 months I have had a large
number of meetings with my ministerial colleagues, together with
the heads of the different departments in the Welsh Office. We
have had those meetings as part of our own determination to make
sure that the priorities that we identified in the election are
carried through, but also as part of the comprehensive spending
review which is an exercise being conducted by the Government
as a whole. We did want to reflect our priorities in the spending
programmes for next year and the departmental report by and large
reflects those decisions. The report therefore does reflect the
priorities that we have established within the Welsh Office and
as such therefore I attach very great importance to the report.
2. Can you clarify in what form the Secretary
of State to be will report to Parliament after the Assembly is
established?
(Mr Davies) Post devolution after May of next
year the greater part of the allocation of funds for which I am
currently responsible will of course pass to the Assembly. I am
not in a position, I am afraid, at this moment in time to indicate
what that is likely to be but suffice it to say that it will be
the overwhelming part of that budget that will go to the Assembly.
The Assembly itself will be responsible for putting into practice
its own procedures for forecasting and indeed for reporting on
the outturn of expenditure, but the Secretary of State will also
have a responsibility for reporting to Parliament. The departmental
report then will be of a much smaller sort than the one currently
being published because the greater part of the Secretary of State's
allocation will have been passed to the Assembly and it is the
Assembly's procedures then which will look after that. The Secretary
of State will continue to report to Parliament on the totality
of the expenditure but the greater part of the detail of the block
which has gone to the Assembly will be a matter for the Assembly
itself.
3. Will the Secretary of State's report
to Parliament be likely to be the Assembly's expenditure document?
(Mr Davies) No. The Assembly itself will be responsible
for determining its own priorities and as such it will have to
set in train its own procedures for forecasting and reporting.
I would say however that whoever is the accounting officer responsible
to the Secretary of State will have to make sure that there are
procedures established between the accounting officer responsible
to the Secretary of State and therefore responsible to Parliament,
and the accounting officer, the Permanent Secretary or whoever
is responsible for Assembly expenditure.
4. So basically your Department is still
working on the form that the estimates will take after the Assembly
is established. Can you assure us that Parliament will be consulted
before those things are set in stone?
(Mr Davies) No, I cannot give you that assurance;
I am sorry. The answer to your first question is yes, my officials
are currently working on procedures for estimating and reporting
because they of course by and large will transfer to the Assembly,
and there will have to be these systems in place when the Assembly
is elected. The assurance that I can give you is that my office
as Secretary of State will continue to co-operate with this Committee
but post devolution of course the bulk of that expenditure, the
£7 billion, will be a matter for the Assembly itself and
there will not then be procedures for the reporting of those decisions
to Parliament. That is a matter for the Assembly.
5. I am aware of that, Secretary of State,
but the Secretary of State's role, the report that that Secretary
of State will be putting before Parliament, will be of course
consulted upon?
(Mr Davies) Of course, yes. But it will be different.
The report will be different from that which it currently is.
Mrs Williams
6. Secretary of State, can I go back to
the comprehensive spending review? Could you explain a little
bit more about the nature of this review? Is it largely an exercise
within the Department for re-assessing priorities within Wales
or is the overall level of resources allocated to Wales under
question?
(Mr Davies) I do not think there is any question
at all about the overall level of resources available to Wales
being under question, but there has been no suggestion of that.
The purpose of the comprehensive spending review is for the Government
as a whole to assess its priorities and obviously within the Welsh
Office we have played our particular part in that. It has been
very comprehensive and it has been a review of all spending, so
it is self-defining in that sense. I can assure you that we had
very many hours of deliberation with senior officials and my ministerial
colleagues looking at the priorities that we have, and to an extent
they are reflected in the present departmental report, but of
course they do underpin the findings of the comprehensive spending
review and that review is now being discussed with my colleagues
in the Treasury and the Government will produce its findings later
on in the summer.
7. We know that it has been said that the
outcome of the review is to be published later this year. Will
there be a separate publication for Wales and, if so, when?
(Mr Davies) I am not sure that the report in Wales
will immediately follow the report of the comprehensive spending
review of the Government as a whole because I will want to look
and reflect. But certainly I would hope to produce not necessarily
a supplementary report but a statement perhaps in the autumn as
to how I see the findings of the comprehensive spending review
being carried forward in the light of the Welsh circumstances
and as we prepare the provisional budgets for next year.
8. You say that it will be published later.
How long do you think you will need to study that review before
you make your announcement in Wales?
(Mr Davies) I am afraid I cannot give you an answer
to that at the moment. It is something that I will have to look
at and it will depend on when the report is finalised by the Government
as a whole and at what period in the cycle the report is published.
I do not think it would be particularly helpful if I were to rush
to get a report out in August, but neither would it be of much
value if I delayed it until November or December. I think if you
were to look for a period in the early autumn, that is when I
would be intending to get it out. I am afraid I cannot give you
a guarantee at this moment in time because it depends on circumstances
which are indeed beyond my control, except to say that I would
want to get it out and make it as clear and as comprehensive as
possible.
Mr Llwyd
9. Your expenditure plans for the current
year appear to show that some, that some would describe as being
under strain already, are going to bear the brunt of reductions,
for example agriculture and education. Do these expenditure changes
merely reflect public expenditure allocations across the UK? Secondly,
to what extent are you free to make special provision for Wales,
targeting expenditure at particular areas of concern to Wales?
Perhaps you could give us an idea of how much the Welsh Office
budget is in practice out of control.
(Mr Davies) There are a number of questions there.
To be fair, can I just take them one by one?
10. My first question is about the expenditure
changes. Do they merely reflect the expenditure allocations across
the UK?
(Mr Davies) The direct answer to that is no, they
do not. They do reflect the priorities that we have established
in the Welsh Office. It is fair to say however that we do not
have an entirely free hand because many of the decisions relating
to local government for example or the education expenditure,
the National Health Service expenditure, are in a sense already
fixed, so the opportunity of exercise of discretion is somewhat
limited. There is a fair amount of flexibility, however, and we
do have the opportunity to increase or reduce education expenditure
or National Health Service expenditure or housing expenditure
or industrial development expenditure and so on.
11. To what extent are you free to make
special provision for Wales, targeting particular areas of concern
in Wales?
(Mr Davies) The two cases that you cited in your
earlier question were agriculture and education. In the case of
education we have increased during the current year education
expenditure for infant education by in excess of one million pounds
as a result of the phasing out of the assisted places scheme.
That of course reflected a manifesto commitment and it was the
sort of decision which would have been taken across Government
as a whole. In that sense it reflects the spending priorities
of the Government as a whole. It is true to say however that we
did have the flexibility in Wales in theory to use that money
for other purposes if we wanted to do that, but given the operation
of collective Cabinet Government I would have to seek the agreement
of my colleagues in Cabinet if I were wanting to do something
else. Equally, the £50 million which has gone on top of the
original budget for education expenditure reflected the decision
of the Chancellor to make that sum available for education. Fifty
million pounds was the amount of money which was made available
to me in Wales and I have ensured, certainly as best I can, that
that money has gone directly to schools to reduce class sizes
and improve standards. In that sense I have some discretion over
the matter but it coincides with the policy of the Government
as a whole. In the other area you chose, of agriculture, it is
true to say that whereas the expenditure is not out of control
it is not under my direct control.
12. It is out of your direct control, not
out of control?
(Mr Davies) I was worried by your question. I
just wanted to clear that. Yes, you are quite right. There have
been two big changes in agricultural expenditure this year. The
first is the reduction in HLCAs and that is outside my control
because it was the HLCA expenditure last year which was increased
because the then Government chose to use HLCAs as the mechanism
for paying agri money compensation. It was the desire of the Commission
to insist that that one-off payment was a one-off payment and
the present Government therefore cannot use HLCAs as a mechanism
for paying agri money compensation even if it wanted to. In that
sense the HLCA reduced expenditure is beyond my control. Equally,
the other big area is the payment of agri money compensation during
the current year, the pre-Christmas package, which I think is
about £12 million in the case of Wales. That expenditure
was part of the package which was agreed by Government as a whole.
I played my part in those discussions in making sure that that
package was agreed by the Government and was used in the way that
it was. Once that decision had been taken it was then implemented
in Wales, so I was party to the decision and therefore I carried
that policy through.
Mr Llwyd: I am most
interested in the replies but I know my colleague Mr Livsey will
wish to ask you about agriculture later on this morning. Thank
you.
Mr Caton
13. Secretary of State, spending on central
administration including devolution rose by £2.1 million
last year and it is planned to increase by £18.5 million
in the coming year. Devolution apart, why are admin costs going
up?
(Mr Davies) I have to check with Emyr Roberts
who is the Director of Finance Programmes on the technical part
there, but I think you will find that, devolution apart, expenditure
is actually going down. If it is acceptable to you, Chairman,
I would ask Dr Roberts to answer.
(Dr Roberts) That is certainly right. The inherited
budget showed quite a sharp fall in central running costs. Treasury
approved a further £4 million for running costs and £2.3
million of that was for devolution related expenditure for the
current year.
(Mr Davies) So the answer is: devolution apart,
there is actually a reduction in the Department.
(Dr Roberts) Yes, as shown in table 1.03.
Chairman
14. Can I just clarify a point? You mentioned
table 1.03. According to that table the costs of central administration
have gone up by £18.5 million and £17.8 million of that
is reputedly on devolution. Is that correct?
(Dr Roberts) Yes, that is right. That is devolution
capital.
(Mrs Jordan) For the Assembly.
Mr Caton
15. Has your decision to site the National
Assembly at Cardiff Bay changed the forecast expenditure on devolution
given in the report?
(Mr Davies) Yes, and in a sense the figure between
£17 million and £20 million was the figure that was
quoted in the White Paper. Had things gone differently it may
well have been that we would have incurred the bulk of that expenditure
during the current year. Certainly that was my intention, and
we would have used it for the acquisition of City Hall in Cardiff
and for the expenditure that was necessary to bring that up to
a suitable standard for the Assembly in May of next year. The
bulk of the expenditure would have been incurred in the current
financial year. That now is not the case. We will not be incurring
anything like that full amount during the current year. There
will be somewhat less than £5 million, half of which will
be used for temporary accommodation and part of it will be used
I hope for the initial phase of construction of the new Assembly
building. What I will then want to do is to arrange for my officials
to carry forward the money which is not spent this year out of
that capital allocation so it will be available in the next financial
year for the completion of the budget.
16. Can you give us a breakdown of the forecast
current expenditure on devolution? For instance does it include
the £300,000 estimated for publicity?
(Mr Davies) I am not sure which expenditure head
that is.
(Dr Roberts) That is indeed in table 1.03. It
is part of the half a million pounds which is devolution current
expenditure which is identified there.
Mr Livsey
17. Secretary of State, you answered a question
about the location in Cardiff Bay and you mentioned a sum there.
Does that include the costs of Crickhowell House or are the Welsh
Office providing that as it is your own property anyway?
(Mr Davies) At the moment there is a long term
lease on Crickhowell House and the costs of that have been borne
by the National Health Service bodies which are in Crickhowell
House. If those bodies move out of Crickhowell House in their
entirety to Cathays Park, for example, where the Welsh Office
is currently located, it will result in a saving to those National
Health Service bodies, but it is the case then that the current
rent of Crickhowell House will have to be borne by the Welsh Office.
18. Would it have cost less to have got
City Hall instead, given the offer of no charge?
(Mr Davies) No. There never was the offer of no
charge for City Hall. All of the estimates that I have show that
the decision that we have now taken to locate the Assembly in
Cardiff Bay not only represent the best possible site (although
I acknowledge that that is very much a subjective judgement) but
that it is much the cheapest of the options, certainly as between
the Bay and City Hall or any of the other Cardiff options that
we looked at. City Hall for example would have incurred expenditure
of I think upwards of £5 million just to make it usable for
the initial three or four year period which has been talked about
as the temporary home for the Assembly, so it was much the more
expensive of the options. That expenditure would have been nugatory.
The expenditure that we will incur in Crickhowell House will by
and large be expenditure which will be of long term benefit to
the Assembly.
19. So that the two million now being spent
on it for the European Summit would have been inadequate to house
the Assembly for the next few years?
(Mr Davies) Absolutely. The £2 million was
a programme which was by and large agreed between the Welsh Office
and Cardiff to provide a face lift for the building. The Summit
is very much a short term project, as you will understand. If
City Hall were to be turned into a building suitable for long
term occupation by the Assembly there would be much more substantial
works required.
