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Session 1999-2000
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Welsh Grand Committee Debates

Comprehensive Spending Review

Welsh Grand Committee

Wednesday 19 July 2000


[Mr. Barry Jones in the Chair]

Comprehensive Spending Review

10.30 am

The Secretary of State for Wales (Mr. Paul Murphy): This spending review is good news for all the people of our country. There has been a sustained and sustainable improvement in public finances, which allows sustained and sustainable improvement in our public services. The Government have delivered that improvement by creating stability and sustainable public finances, and establishing clear fiscal rules over the economic cycle. Our current budget is in balance, and we are borrowing only to invest within prudent and cautious limits. We have low inflation, stable growth and year-on-year current budget surpluses. The national debt is being repaid this year and next year, and extra resources are available because of—not at the expense of—our prudence. Moreover, with the help of the new deal, unemployment is now at the lowest level for 20 years. Almost 28 million people are in work in the United Kingdom—more than ever before.

Now that we have the firm foundation of stability and a strengthened economy, we can move to the next stage in the creation of a better future. Prudent, targeted long-term investment is a social good, but in a changing and often insecure world, it is also an economic necessity. The Government have stuck to the spending envelope that was firmly established in this year's Budget. Total spending in the UK will grow by 3.25 per cent. a year in real terms. Savings on debt interest and social security have enabled the Government to free resources for priority public services. More than 75 per cent. of all increases announced in the spending review were for health, education, transport, housing, and law and order. The review's main objectives are to extend opportunity, promote responsible and secure communities, raise productivity, sustain growth, and provide a modern international role for Britain.

The spending review will not only provide cash for the Assembly but have a big impact on the quality of people's lives in Wales. In the main, the police and fire services in Wales are funded by the Home Office. By 2003-04, overall Home Office spending will be £10.6 billion—an increase of £2.4 billion on this year's plans—and in the House today, my right hon. Friend the Home Secretary will set out his targets and how that allocation will be spent. The annual police budget will rise by £1.6 billion. Some of that money will be used to boost the spending power of police forces in Wales, which will have a real impact on local communities. On the subject of policing, I welcome yesterday's figures, which show an overall reduction in crime rates across Wales as a whole.

There is also a good settlement for the fire service in England and Wales, which will receive an average increase of 4.5 per cent. The criminal justice system will get more money, which will fund a programme to modernise the courts system in England and Wales. Courts will be able to improve their service and facilities, and help to ensure that cases progress more efficiently. The Department of Trade and Industry will receive a significant increase in resources to enhance Britain's world-class science base, and there will be extra funding for science and key research areas.

Universities' potential as engines of growth in the knowledge economy will be expanded through extra funding to commercialise research and engage with business. There will be increasing focus on building a more competitive environment, with better regulation, modern company law and effective enforcement of competition policy. All those initiatives will affect the business landscape in Wales, and—combined with the boost provided by objective 1, which I shall discuss in a moment—present a real opportunity for genuine change in the Welsh economy.

The Government are improving the delivery of social security services to the public, so that staff and claimants of working age can focus on finding work, not on processing claims. The service for pensioners will be overhauled, so that they can make their claims over the telephone, and the legacy of fraud and error will be tackled to release further funds to where they are really needed.

The new deal will become a permanent deal. The ONE service will be extended, so that benefit recipients receive a more integrated service and claimants benefit from a personal adviser service to help them into work—which I have seen in my constituency. The new deal for over-25s will be enhanced to increase rights and responsibilities.

Of course, the real news is the outstanding settlement for Wales that my right hon. Friend the Chancellor of the Exchequer announced yesterday. In 1999-2000, the Welsh departmental expenditure limit was just over £7 billion. By 2003-04, it will rise massively to almost £10 billion. The spending review has produced an excellent outcome for us. It represents a 5.4 per cent. above inflation average annual increase in provision—the biggest ever increase in Welsh public spending. It will give an immense boost to public services in Wales and will have a real impact on the quality of life for all the people whom we represent.

Overall, the settlement will increase the size of the Welsh departmental expenditure limit by around £2 billion by 2003-04. Most changes in the Welsh budget have been linked to changes in United Kingdom departmental spending plans by the Barnett formula. That gives Wales a population-based share of changes in comparable spending in England.

An extra £1.2 billion over the next three years was announced for Wales in the Budget earlier this year—£153 million for 2001-02, £394 million for 2002-03 and £653 million for 2003-04. That increase was included in the figures that were announced yesterday, but I am pleased to confirm that the amount that Wales will receive over that time has, as a consequence of increases in health spending in England, risen to £163 million for 2001-02, £458 million for 2002-03, and £728 million for 2003-04. Those figures are over and above the increases that my right hon. Friend the Chancellor announced previously. That real increase of an extra £149 million over the next three years will come to Wales because of the extra spending on health in England that was announced yesterday.

Wales will get £78 million in 2001-02, £183 million in 2002-03 and £290 million in 2003-04 as a result of extra spending in England on education. That excludes the funding that we will receive because of increases in education funding for local government.

Roads and public transport will receive significant increases as a result of the spending review, and Wales will consequently get an extra £40 million in 2001-02, £94 million in 2002-03 and £163 million in 2003-04.

The significant increases in spending in England will feed into Wales through the Barnett formula, and will help to build up the massive increase in public funding available in Wales that was announced yesterday.

As I have explained, the Assembly has the freedom to make its own spending decisions about the use of the extra resources in response to Welsh priorities, but the settlement will make a huge difference to the services that it provides. It will give the Assembly, in partnership with the United Kingdom Government, the resources to deliver better services and increase prosperity for all the people of Wales.

The total increases over next year's planned baseline are £480 million in 2001-02, £1.173 billion in 2002-03 and £1.821 billion in 2003-04. Those resources will be invested in modern public services for Wales.

Best of all, the settlement for Wales includes cover, outside Barnett, for the structural funds programmes in Wales. The Government have made good their commitment not to let Wales down over objective 1—£80 million pounds will be made available in 2001-02, £90 million in 2002-03 and £102 million in 2003-04. In addition to that, the European social fund money is being transferred to the Assembly from the Department for Education and Employment. That will give £38 million next year, £58 million in 2002-03 and £58 million in 2003-04.

Altogether, that means that additional funding of £113 million in 2001-02, £148 million in 2002-03 and £160 million in 2003-04 has been made available for the structural funds programmes in Wales. That means that the full forecast increase in structural funds receipts in Wales is covered. This is the first time ever that a settlement has gone beyond Barnett for structural funds. It is unprecedented. The money is completely extra, above and beyond the block grant. It is Barnett-plus.

This is a very generous settlement that recognises the special needs of Wales, with objective 1 covering around 65 per cent. of the population of Wales. Our valleys, one of which I represent in the House of Commons, west Wales and large parts of north Wales will all benefit from this funding. The settlement unlocks objective 1 funding to be used exclusively in Wales, for the first time in financial history.

I have talked to my hon. Friend the Member for Cardiff, West (Mr. Morgan) and Edwina Hart, who agree that as a result of this settlement no worthwhile objective 1 project will be held back by a lack of resources. The Government have cleared the way for objective 1 to be a success in Wales. It is now time to move forward and to concentrate on the important business of ensuring that this objective 1 structural funding is a success. We need to encourage good projects, to make the most of this once-in-a-lifetime opportunity. We can do that only by working together in partnership between the United Kingdom Government, the Assembly, and local authorities and communities in Wales. We have been given this opportunity and we must not squander it. We owe that to the people of Wales who send us to the House of Commons.

Taken together, this is a first-rate settlement for Wales. It is possible because the Government have managed the economy sensibly and prudently. Now we can reap the benefit of that and invest in the future of Wales.


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Prepared 19 July 2000