Select Committee on Welsh Affairs Minutes of Evidence


Examination of witnesses (Questions 20 - 39)

TUESDAY 19 MAY 1998

THE RT HON RON DAVIES, MP, DR EMYR ROBERTS, MRS JOANNA JORDAN and MR RICHARD CLARKE  

  20.  Can we switch to agriculture, Secretary of State? As you will know, our report on the present crisis in the Welsh livestock industry is due to be published tomorrow and we must not anticipate our findings here. Nevertheless, you know the concern that we all feel about the state of agriculture in Wales. Surely this is not the time to reduce expenditure on agriculture by over 17 per cent, or are there special reasons for this?
  (Mr Davies)  I would refer Mr Livsey to the reply that I gave earlier to Mr Llwyd. It is not a question that the Welsh Office has taken a decision to reduce expenditure. That is not the case and any suggestion that that were to be the case would be inaccurate. What has happened is that for technical reasons the expenditure has gone down. I referred earlier to the decision last year to use the HLCA mechanism as the means of paying agri money compensation. The financial year just finished, 1997/98, had an element in it of some £12 million which the present Government decided to pay in agri money compensation. The expenditure plans that we have got at the moment of course do not have any provision for agri money compensation because the Government has taken no decision yet as to the payment of such compensation, although it is true to say that the Government will keep that matter under review. Were there to be—and this should not be taken as a suggestion that there will be—any payment of agri money compensation in the current financial year, that then will reflect in the figures which will be published at the end of the year, so that gap would be reduced.

  21.  And this is shown graphically in the agriculture expenditure coming from the EU receipts on your report, page 9, where you have got a forecast outturn of £212 million as against £178 million at the present time. This obviously reflects changes in the value of the pound and agri monetary movements. We have a number of problems coming up but that of course is in the coming year. However, the calculations obviously have taken into account movements in the pound. Are they fixed at a particular level?
  (Mr Davies)  I think it would help if I were to explain that the agriculture estimate for the Welsh Office originates from two sources. First of all there are the CAP payments which are largely determined on a headage basis. They determine that at a European level and if we have eight million sheep and X million cattle we get the appropriate amount and that does not come out of the block but it is reflected in these expenditure plans. Then there is the other part of expenditure which is the domestically determined agriculture expenditure. That is fixed between the agriculture ministers, with the Minister of Agriculture as the lead Minister, and the Treasury as a whole and then we in Wales get a percentage of that which is fixed for the UK as a whole. We actually do rather well in Wales. I hesitate to say this when there are colleagues representing English constituencies present because they might berate me for it, but I think it is fair to say that whilst we do not have 25 per cent of the UK population, we get about 25 per cent of the total UK domestic agriculture expenditure, so we do have some discretion over that element but we do not have discretion necessarily directly on the CAP element.

Mr Paterson

  22.  Secretary of State, at Carmarthen, at the Welsh Grand Committee where you were, the local MP was booed by farmers. You have explained the technical reasons why the farmers will receive less money this year, but our report which we have produced shows that the situation in the hills particularly is absolutely desperate. I wonder if the Government really understand how bad things are, particularly when you consider the shocking weather we had just before Easter which hit sheep farmers just at the wrong moment for lambing. I do feel circumstances are exceptional at the moment.
  (Mr Davies)  I certainly understand how serious the problem is and I have understood for the last 10 years how the crisis has been deepening and it was for that reason that, certainly as long as eight years ago, I was warning the Government about the incipient crisis of BSE and urging them to take much more robust action.

Chairman

  23.  As we all were.
  (Mr Davies)  As indeed you were in the previous incarnation as it were. It is a matter of great regret to me that the previous Government did not understand what it was doing in the handling of British agriculture. The present Government has moved very quickly and very decisively to try to get some improvement in the prospects for the soaring beef market. I think we have made a considerable breakthrough at a European level. We have paid agri money compensation, as I indicated, and we do keep the whole of the agriculture industry under close review. Prior to the Carmarthenshire meeting of the Welsh Grand Committee, I think I had 15 official meetings with representatives of the farming organisations, and I have had many more informal meetings with delegations from colleagues here of the Welsh Grand Committee, so I am very well aware of the problem. But of course Mr Paterson will understand that the Government currently is following, certainly for last year and this year, the expenditure plans which were laid down by the previous Government which he supported. I would be very interested to know if Mr Paterson is now suggesting that we should change those expenditure plans, presumably either by having increases in taxation or by cutting other programmes because this is the reality of education or health or other forms of economic development, to make additional payments to farmers. I should be very grateful; I am not sure if it is entirely in order for me to question members of your Committee but this is a question which has been bothering me for some time.

  24.  I would be delighted to have your job and make decisions, but you are in charge. You are quite right when you say that the Welsh portion of the agriculture budget is a higher percentage than for the English areas. That is quite right because agriculture is so overwhelmingly important an economic activity in particular in the hills. You switched to BSE which is always a clever political trick. I am actually referring to the sheep industry which has been particularly hit, as Mr Livsey knows. I am not trying to make a cheap political point. I do think that agriculture has an overwhelming preponderance of economic activity in many parts of Wales, but for various reasons there is a very real crisis. I think circumstances are exceptional and you are the man in charge and I think it is right to ask: are you prepared to do anything exceptional under exceptional circumstances?
  (Mr Davies)  There are two questions which Mr Paterson raises. The direct answer to his second question is yes, of course, and that is what the Government has done and that is why we have had two very substantial tranches of help both before Christmas and after Christmas. I will continue to meet the farming industry and I will continue to make sure that the British Government responds as effectively and as sensitively as it can to changing circumstances. There are many things that can be done at a Welsh level and I am certainly doing that, trying to devise the necessary strategies which will allow us a distinctive response to these problems. His first point I must take issue with. The raising of the matter of BSE is not a cheap political trick at all. I think that the root cause of the problem that we have at the moment with the British livestock industry is traceable back to BSE. It is not a problem which only affects the beef industry. If you look at the way that our export industry has been hit; if you look at the extra charges which are on the sheep sector, for example, they stem directly from public concerns about the problem of transmissible encephalopathies. There is no indication that the sheep sector presents any danger at all, but because public anxieties have been raised as a result of problems with BSE which are largely past us now, there is in place a whole series of mechanisms which do affect the livestock industry as a whole. It is not possible to say that the sheep sector can be viewed quite independently of the beef sector. That is not the case. There are enormous implications. It is not only for sheep; it is for the whole of the livestock sector and the feed processing industries as well.

Mr Llwyd

  25.  Unlike my colleague, I do not have my eye on your job,——
  (Mr Davies)  Nor do I on yours, Mr Llwyd.

  26.  For the time being. Following your answer, there is a distinction to be drawn, is there not, between beef and lamb because frankly we have a problem in Wales because, although we have a very good product, the large chain stores are not actually selling it as they should. Part of the reason, as I understand it, may well be the fact that we do not have any large freezing plants. This is something which the Government as part of its strategy I have no doubt will be considering. Am I right in thinking that?
  (Mr Davies)  Yes. Certainly I await with great interest the report of your Committee, Mr Jones, which as I understand it is out tomorrow.

Chairman

  27.  You probably do not need to respond to that, Secretary of State, since we are straying into the area of——
  (Mr Davies)  I am quite happy to do so. As I say, I await the report with interest. As I say, I do not know what is in the report but I will look at it very carefully. I will respond to the point that Mr Llwyd has made because I am very concerned about the infra structure that we have in Wales for agriculture. This is not in anticipation but before your report is published, and it is for that reason that I have, with the Welsh Development Agency in the new powerhouse that we have created, had numerous discussions with the Board, with the Chairman, with many other people concerned with agriculture in the food promotion industry, with the universities, both at Aberystwyth and at Cardiff, to look to see how we can develop an agenda for the better promotion of Welsh foodstuffs. It may well be that we do have to have investment in infra structure. I cannot give any undertakings at this stage what that might be or what my view would be, but suffice it to say that I do recognise that we have many problems with the infra structure, with marketing of our Welsh products. I want to see Government being an active partner. At the end of the day it will be down to farmers to produce a commodity people want and people are prepared to buy in the market place, but Government does have a role to play in assisting the rural community. There is a special Rural Policy Unit within the overall Policy Unit of the Welsh Development Agency, and I very much hope that, as we move forward with that reorganisation, we will be able to do more to assist in a proactive way the promotion of Welsh resource.

Mr Thomas

  28.  Secretary of State, you will be aware that the all-Wales Agri Environmental Scheme has been widely welcomed as a positive initiative to the problems facing Welsh agriculture and environment. Can you give us your assurances that you will use your best endeavours to ensure that that scheme is adequately financed?
  (Mr Davies)  I will certainly use my best endeavours and I have a vested interest in doing it because the scheme is largely one of my own creation. The funds are limited; there is no point in beating about the bush. I think the importance of the scheme however is that it establishes a scheme as an all-Wales scheme so that everybody has an entitlement. I acknowledge that that entitlement is in part theoretical because the scheme will be rationed according to the quality of the environmental output. It is therefore theoretically available as an all-Wales scheme, but it is only the best projects that will be funded first. It is important however that we establish that principle. The second benefit I think is that it will allow us in Wales, as we see the reorganisation of the European Union and the renegotiation of the common agricultural policy, to have a scheme that we can present both to the British Government as a whole and to the European Union and say, "Look: if it is the desire of the European Union"—and I believe it is—"to move the emphasis of the common agricultural policy away from direct commodity support towards more direct assistance which brings in other benefits like environmental ones, we have a tried and trusted scheme here in Wales", and I think that will be of enormous benefit whilst arguing the case for reform in Europe as a whole and getting the benefit because we will have the advantage of having a scheme up and running.

Chairman

  29.  Perhaps we can move on to education now. On table 1.02, page 3 of the report, in the column "Education, Welsh Language, Arts and Recreation", the forecast outturn for 1997/98 is £613.5 million, and the planned expenditure for 1998/99 is £567.2 million, which seems to me like a reduction of £46 million. In table 7.02, again the outturn is forecast at £1,263 million and the 1997/98 figure is £1,240 million, which seems to be a reduction of £23 million. Can you tell me how this is consistent with the Government's commitment to give priority to education?
  (Mr Davies)  Yes. Dr Roberts is checking the second question. I do not have the table in front of me at the moment. The first thing that you quoted is mainly a direct result of the transfer of the nursery voucher money from direct Welsh Office expenditure to the local authorities. That is money of course which has now been repatriated as it were, given back to local authorities, and you will see that there is a corresponding increase in local authority education expenditure. I am sorry: I have not been able to track down the second question.
  (Dr Roberts)  Which table are you referring to, Chairman?

  30.  Table 7.02, page 69. It does seem, certainly in my local authority area, I have got a school which basically has class sizes in this coming year of 40 or more. They are obviously very concerned that the Government's commitment to reduce class sizes is not having an effect in that area. Obviously there are going to be individual anomalies and we cannot address that individual case, I am sure, but perhaps you could say when schools like that might expect to have their class sizes reduced.
  (Mr Davies)  I acknowledge that there is a particular problem in Wales because of the existence of small rural schools which present their own problems in terms of trying to meet a defined target such as a limit of 30 on schools, because it does in a sense take away some of the flexibility which has traditionally been one of the stronger elements of education provision in smaller rural schools, so there is a particular problem. Win Griffiths who, with Peter Hain, has been looking at this matter over a period of time, has identified a number of strategies and I certainly hope that Peter Hain, who has direct ministerial responsibility now, will be able to find solutions to this general problem. It is the case, however, that we have the target of reducing class sizes. That is a clear objective of the Government, and it is our policy to try to meet that. I would refer you to the question I answered right at the outset of this hearing, that whilst I did indicate that we are putting over a million pounds to reduce infant class sizes as a result of the phasing out of support for the independent sector, and during the Budget of last summer a further £50 million has been made available to local authorities. What I want to do, and I acknowledge that this is potentially going to be difficult, is to make sure that that money, which has been made available for local authorities for the specific purpose of reducing class sizes and improving educational standards, is used for that purpose. My officials are in touch with the Welsh Local Government Association and indeed we have required our Welsh local authorities to submit returns to the Welsh Office which we are currently evaluating to try to track this money to make sure that it is actually used for that purpose. That is the determination that I have and I will follow that determination ruthlessly. Certainly it is my intention that, as we move through this Parliament, because it was a manifesto commitment that we gave for delivery over the five year period of Parliament, to make sure that we deliver that commitment.
  (Dr Roberts)  On table 7.02, this is total local authority expenditure for Wales. Therefore it relates to support given by the Welsh Office but also has income generated by local authorities themselves. The final column there is in fact 1997/98, so it does not refer to the current financial year, and obviously a substantial part of our revenue support grant is not hypothecated by the Secretary of State, so these are decisions made by the local authorities themselves.

  31.  You answered the general point but I am looking particularly at the column "Education, Arts and Libraries" which has increased. If you go back to 1995/96, it is £1,241 million. In 1997/98, which is the outturn in this report, it is £1,263 million, and then the forecast is reduced by £23 million.
  (Mr Davies)  That figure that you are referring to in the end column for the outturn for 1997/98 does not include the additional money which went in direct to local authorities, so there will be an increase on that figure in terms of the total expenditure on education via local authorities.

  32.  In other words it does not include the £50 million?
  (Mr Davies)  That is right.

Mrs Williams

  33.  Could I turn to further education, Secretary of State. It has continued to expand while funding really remains roughly constant. That sector has expanded vastly since 1993 but when we look at the unit costs per student you will see that they are coming down by around £200 or more per year. Are you satisfied that the quality of further education is being maintained because people in this sector have expressed great concerns to myself?
  (Mr Davies)  I am sure there are many problems that we have in further education. Some of the colleges have not performed as well as they should and I do have very serious concerns. I am also not entirely sure at this moment whether we get the best value for money out of the present system of delivering post-16 education. It is for that reason that we have a task force which is looking at this and that task force has representatives on it of the colleges, of the local education authorities, the schools and the private sector, which is looking to see how best we can make sure that we have mechanisms in place for the funding of post-16 education which makes sure that we get the best return possible for the money that we spend. That may well lead to some difficult and controversial decisions for us in the Welsh Office, but there is no doubt at all in my mind that this is a critical area. Education is a priority of the Government and certainly in Wales, if we are to perform better economically, we will have to rely on the skills and qualifications of our workforce and we have to address this area of post-16 education. It is a problem area. I am not satisfied with it at the moment and we will look very closely at it.

  34.  Can you tell us more about the timescale?
  (Mr Davies)  I am afraid I cannot at this stage. I will just check with my officials but the task force is looking at this matter and I am afraid I am not prepared to answer that in the sense that I would happily answer it if I could but I have not had the preparation necessary to answer the question. It has been pointed out to me that the Further Education Funding Council's grant for the current financial year has been increased by £8.9 million which does of course more than offset the reduction which was planned by the previous Government, so there has been an increase in expenditure but, as I understood it, the question was about the value that we get from that expenditure.

  35.  It is expanding, the figure of £200 or more a year. This is what I was after really. Why is it expanding and with a greater number of students where does that take us? You are not able to tell us when the task force will be able to give us an indication as to how things are going in Wales?
  (Mr Davies)  I am afraid I cannot at this stage, no.

Mr Caton

  36.  As you said, compared to the previous Government's plans you have added a considerable amount of money to the further education budget but, even after that, the Further Education Funding Council for Wales was requiring efficiency gains, as they call them, of 8.7 per cent from colleges. Are you concerned that this looks like being met by very substantial cuts in community education across large parts of Wales?
  (Mr Davies)  I am concerned at any reduction in educational provision and I am very conscious of the great benefit that community education does provide, but I am also conscious that as Secretary of State I have a budget which is limited and I have to make spending priorities. The decision as to how its grant is distributed is a matter for the Further Education Funding Council and it would be wrong of me to acknowledge that system and then to try to second-guess their decisions.

  37.  You mentioned the task force you have set up. Is one of the things that that will be looking at the comparative expenditure per student in sixth forms in our schools as compared to the further education sector?
  (Mr Davies)  Yes. That is the key. If you look at the level of expenditure which goes into the different sectors of post-16 education, there are great discrepancies and I am not satisfied that we are targeting at the moment on the outcomes. It seems to me that what we need to do is to target the outcomes rather than to pay on structures.

Chairman:  I am sure, Secretary of State, you will take into account the very good report of the previous Committee on further education in Wales, made under the chairmanship of Gareth Wardell who, I am delighted to say, is in the room today, which is very worrying for me because he is obviously checking up on me, but welcome to the Committee.

Mr Paterson

  38.  Can we turn to health please? Are you happy with the additional funding that you made available will be sufficient to reverse the increase in waiting times which we saw last year?
  (Mr Davies)  It is going to be difficult. I think the Secretary of State for Health referred to it as the ocean liner effect which we would all be familiar with in terms of turning round the programme. The Government has indicated that it wants to see a reduction in hospital waiting lists. We have to make sure that as that is done the Health Service also responds on the basis of patient need and patient need does not always correlate of course with length of time on waiting lists. This is a problem we have in the National health Service. I am satisfied that the changes we are now seeing through in Wales will result in the reduction in bureaucracy and the application of additional resources to front line patient care. Certainly, as with the reduction in class sizes, we have a manifesto commitment to reduce hospital waiting lists over the period of the Parliament, and I am satisfied that the additional resources which have gone in and the reorganisations that we have carried out which have released more funds from within the existing budget will eventually bring about that reduction.

  39.  When?
  (Mr Davies)  This depends on so many factors. We are proceeding very rapidly and I cannot make any forecasts about the state of the health of the nation. It would be foolish of me to forecast what next winter's weather is going to be or the extent to which a new bout of Asian `flu will strike the people of this country. I cannot make that forecast. What I can say however is that the Government is determined to bring about a reduction in hospital waiting lists. We are following policies which will bring that about and I am afraid that Mr Paterson will have to wait like the rest of us for an answer to that particular question about when we will see that reduction.


 
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