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Mr. Wigley: I accept that it is vital for Cornwall, South Yorkshire and Merseyside to gain the full advantage of their potential from the funds, but is there not a difference between those areas and Wales? Public expenditure in Wales is defined according to the Barnett block, which was drawn up for the coming financial year--2000-01--before we knew that we would receive money from the European Union. As a result, any money that we must advance as match funding from the Barnett block will inevitably be granted at the expense of health, education or other services that it would otherwise have financed.
Mr. Davies: I understand the point, and I will deal with it, but what I am saying has nothing to do with the Barnett block. I was making the simple point that the problem is not peculiarly Welsh, but relates to Yorkshire and Liverpool as well. The funds that go to those areas must also be matched. We can discuss where the matching funds come from, and I shall do so in relation to Wales, but this is a British problem. British Exchequer money will have to be found as a last resort, and as the British Exchequer is responsible to the House, the House must be involved.
The right hon. Member for Caernarfon (Mr. Wigley) is right in respect of Wales. In theory, the money could be provided as a first charge on the Welsh block grant. As he rightly said, if the money was drawn upon under objective 1 match funding, it would to some extent be denied to health, education and local government. I do not see how it is possible to operate the Welsh block budget against the background of a first charge of £1.2 billion. Quite apart from the consequences, I do not see how,
technically, we could spend money on hospitals knowing all along that there was a charge on that money for the payment of objective 1 match funding.
I agree with the right hon. Gentleman that although in theory that is possible, it is not realistic to expect the match funding to come out of the budget for education, health or local government. We all know of the pressures in our constituencies on the health budget and of the debts of health authorities and hospital trusts. There is pressure on local government, which in my constituency is having to close old people's homes.
The match funding can come only from Her Majesty's Treasury, as an ultimate guarantee which may not have to be drawn upon. I would understand if Treasury Ministers and civil servants were concerned about giving a blanket guarantee over six years for projects that had not been dreamt up. No one knows what those projects will be, and they may not produce wealth for Wales. How do we get out of that dilemma? It would be reasonable and sensible for that Treasury guarantee to be given with the condition that when projects concerned with match funding were conceived, they had to be approved by the Treasury and the Welsh Office. That would not be an open-ended commitment.
There is no such open-ended commitment now with the £1.2 billion from Brussels. The European Commission has to give its imprimatur to schemes. Brussels does not, therefore, simply write a cheque for £1.2 billion. If we are, through the House, calling on the Exchequer and the British taxpayer also to provide up to £1.2 billion--it is realistic to ask for that amount--it is right and proper in constitutional terms that the Treasury and the Welsh Office should approve each particular project, as the Commission does and as the Assembly has for the Cardiff bay project.
That would be fair because the match funding is not devolution money. By definition, it is additional to that. The devolution settlement is the block grant, and it comes to about £8 billion a year. That is to be spent by the Welsh Assembly. The match funding will come from the Treasury, which is accountable to the House, and the Welsh Office must also be involved.
There is another reason why there should be approval from central Government Departments such as the Wales Office and Treasury. In Wales, sadly, the amount of money raised in taxation does not come anywhere near the total amount of public expenditure that comes into Wales. About £7.5 billion to £8 billion of public expenditure goes through the National Assembly. Almost an equivalent amount comes to Wales outside the devolution settlement. Total Government public expenditure in Wales is £15 billion to £16 billion. However, the amount raised in Wales in taxation is about £10 billion, so there is about £5 billion leeway. The extra £1.2 billion, if it must all come from the Treasury, does not come from Wales. It does not come from Scotland. It comes from the more prosperous areas of England, whose taxpayers are asked to make that contribution.
The right hon. Member for Caernarfon made a speech some years ago--I hate to remind him of it, as he knows what I am about to say--in which he castigated the gin-swilling colonels in Surrey and Sussex. What he did not appreciate was the fact that the more gin they drink, the more money there is to pay the salaries of those who sit in Cardiff bay. That is the reality. We may like it or
dislike it; we may condemn the situation and blame people for it; but if there is, as I believe there should be, a guarantee of £1.2 billion, and if the money does not come from other sources, that money will have to come from the taxpayers--I will not call them gin-swilling colonels--in those areas of England that are far more prosperous than Wales, the north of England or parts of Scotland.
Mr. Wigley:
I am grateful to the right hon. Gentleman for giving way. I will not go after the gin for the moment, although the argument advanced by the First Secretary in Cardiff is persuasive. He suggested that the Treasury has an interest in getting the economy in Wales buoyed up, because it will then have more take from taxation in Wales.
Before the right hon. Gentleman concludes his speech, will he address himself not just to the £1.2 billion of match funding, but to the £1.2 billion coming from Europe? That comes through to the Treasury, and in the coming financial year we will not get a single penny extra out of that money. It comes through to the Treasury, it is then passed to Wales, and it is netted off from our Barnett block. Those are the mechanics. That is why we are constrained in the difficult way that we are. The right hon. Gentleman needs to address himself to the £2.4 billion, not just to the £1.2 billion.
Mr. Davies:
I am very fond of the right hon. Gentleman, but he is not at his best today. Sometimes he does all right, but today he has not been listening, or perhaps he does not want to hear. I stated clearly that £1.2 billion comes from Europe. That cheque will eventually end up in the Welsh Assembly. [Interruption.] If the right hon. Gentleman denies that £1.2 billion will come under objective 1, I do not know where we are.
Let us assume that I am correct. I know that it upsets the nationalists, but the Prime Minister and the Chancellor of the Exchequer manage to get funds for Wales, and also for South Yorkshire, Liverpool and Cornwall. We know that that is because the economies of those areas are in a bad way, and we are not happy about that. We know that that £1.2 billion will come. I conceded the point made by the right hon. Gentleman, on which we all agree, that under the crazy European system--I do not know who devised it--the £1.2 billion must be match-funded by almost a further £1.2 billion.
Mr. Wigley:
I have the Select Committee report, and there are five members of that Committee in the Chamber. The report recognises that we need additional public expenditure survey cover in order to be able to use that money. Unless we get that additional cover, we are constrained to spending within the Barnett block. Unless the money comes in, in the form of additional PES cover, we will lose out on the European component, not to mention the match funding. The Select Committee recognised that, as I hope the right hon. Gentleman will.
Mr. Davies:
The right hon. Gentleman is losing the plot. Let us start again. He should put his book down and think. The European Union will write a cheque for £1.2 billion for Wales. We need another £1.2 billion from the British Exchequer. My right hon. Friend the Chancellor of the Exchequer should guarantee from the Dispatch Box the £1.2 billion for Wales to match the
Mr. Wigley:
That can be argued in terms of financial control; I accept that each project has to be justified. However, I implore the right hon. Gentleman to accept that we need not only match funding cover, but PES cover.
Mr. Davies:
How much more money does the right hon. Gentleman want? Wales receives £15 billion. We raise £10 billion through taxation, which leaves £5 billion. Wales is to receive £1.2 billion from the European Union, and I have said that the Chancellor should give us £1.2 billion--yet the right hon. Gentleman wants more money. After the debate, perhaps he can explain how much more money he wants on top of the £15 billion, the European £1.2 billion and the other £1.2 billion. I make the simple point that there should be match funding. However, that money cannot come from Wales.
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