Welsh Grand Committee
Tuesday 16 July 2002
[Mr. Win Griffiths in the Chair]
Spending Review 2002
The Secretary of State for Wales (Mr. Paul Murphy): Yesterday, my right hon. Friend the Chancellor of the Exchequer delivered a record boost to public services in the country. The Government have been able to deliver such an historic level of public investment because it is built on a platform of stability, low inflation, low interest rates and greatly reduced unemployment. Through fiscal discipline and prudent economic management, we have put in place a more modern and long-term framework for public services, which are of great importance to all who represent Welsh constituencies.
I shall recap on what the spending review means for Wales. First, the Welsh block, which as recently as 1998–99 stood at just £7 billion, will have grown to nearly £12 billion by the end of the review period. That is an astonishing rate of public investment. Secondly, there will be growth in real terms in the block averaging 5.1 per cent. per annum over the period. Over and above inflation, on average we shall have 5.1 per cent. more to spend on public services in Wales each year. Thirdly, the special arrangements for objective 1 outside Barnett, which our opponents claimed could not be introduced and, indeed, doubted whether it could continue, have been maintained.
I shall cover in more detail what the settlement will allow the Assembly to deliver and shall touch briefly on the health increases that we announced in the spring as they form part of the current spending review. When I spoke in Committee at the time of the Budget, I announced substantial spending increases. They ran beyond the usual planning period and reflected the Government's determination to deliver world-class public health care. I shall repeat the figures now. Next year, £128 million extra will be available for health spending in Wales. The year after that, £493 million more than there is at present will be available. The following year, the extra funding increase will be £907 million, the year after that it will be £348 million and, in the fifth and final year, it will be £1,844 million. In 2007–08, £5,681 billion could be spent on health services in Wales, which is 58 per cent. more than in the current year. Undoubtedly, those increases gladden the heart of anyone who uses or cares about the health service in Wales.
We have now matched the health increases with new money for other services. The Welsh block will gain significantly as a result of measures being taken in England, which, for example, include significant additional spending on education. That will bring spending to 5.6 per cent. of gross domestic product by 2005–06 and will ensure that our priority of putting right our education system can be met. There is also
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extra money for the 10-year transport plan, which will improve rail travel and tackle road congestion. There is extra money, too, for housing, particularly affordable housing, which is needed to underpin improvements in other services. Those are among the strides that we made yesterday and the reasons why the Wales block is being increased.
Of course, we tend to focus in our debates on the amounts that flow through my Department and the Assembly, and which make up that Wales block. However, Wales also benefits from other Government spending, both directly from what is spent in Wales by other Departments, such as the Home Office, on non-transferred functions and, more generally, on spending that is incurred for the good of the United Kingdom as a whole. Spending by other Departments on non-transferred services outside the block makes up about half of all the identifiable spending in Wales.
In particular, Wales will also get its share of the new resources for improving law and order services. That will include investment in the police, aimed at delivering tangible reductions in robbery, vehicle crime and burglary, and new funding to tackle drug-related crime. Wales will also benefit from extra investment in information technology for the criminal justice system and the consequent streamlining of the prosecution process. Between them, those measures will make a major contribution to delivering reductions in crime throughout Wales.
There are also spending increases that will make the world a better, fairer or safer place in which to live, although that spending may not identifiably occur in Wales. Like the rest of our country, Wales needs the extra peace of mind that increased defence spending will bring. We also welcome the fairness of the additional increased overseas aid that will be available. The overarching goals of the spending review are very much goals that Wales shares. Raising productivity, extending opportunity, building strong and secure communities and securing Britain's place in the world are objectives that will benefit Wales at least as much as any other part of the United Kingdom. I know that those are goals that the Assembly will share and, so far as it is within its powers, will wish to drive forward.
The productivity agenda is of special interest, given the need to close the GDP per capita gap between the Wales average and that of the United Kingdom. Of course, strong and secure communities are traditionally prized in Wales, and we must continue to promote them for the benefit of all our citizens. Those are all benefits that flow from being an integral part of the United Kingdom, and they are underpinned by the long-standing stability that the Barnett formula has brought to us.
The extra investment is made possible through our prudent management of the economy. It is economic stability and sound public finances that provide the best foundation for long-term investment in our public services. There is never any room for complacency, particularly in a time of global economic challenge, but we shall take no chances with economic stability. We shall ensure that the fiscal rules continue to be met, while taking long-term decisions to improve
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productivity, promote work and enterprise, and invest in our public services.
Some 20 years ago, debt interest payments consumed 4 per cent. of national income; they now consume 2 per cent. That releases £20 billion a year for improved services. There are 1.5 million more women and men in work than there were five years ago. That allows the dead money of benefit payments to be recycled into new investment and enhanced services. Of course, money alone is not enough. Our approach is clear: when more is given in resources, more is required in results. We must ensure that the additional funding is spent wisely.
When the two statements have been made, the Committee will consider proposals to ensure that the national health service in Wales has the structures in place to receive maximum benefit from the funds that Government and Parliament are giving to the National Assembly. It is a principle of this Government's approach that extra resources go hand in hand with modernisation and reform, because that is what those who rely on public services expect and deserve. We are providing the funding and reforming the structures. Those actions together will make the delivery of world-class services in Wales possible.
The Committee is aware that the figures that I announced are totals. The Assembly will decide how it wishes to allocate the totals among services and areas. However, one component of the block is separately identified today: the additional funding that we continue to provide to support objective 1 and the European social fund in Wales. After the past spending review two years ago, I told the Committee that we had stood by Wales and were providing £421 million for that purpose. That special arrangement has been continued in the current spending review and £492 million will be available during the three years that we are addressing. No one is more determined than I that Wales should derive maximum benefit from the unique opportunity offered by objective 1. I did my part in ensuring success by providing additional money in the past spending review. That money had never been provided before that date in the history of the Treasury. Yesterday, I continued that support by continuing to support objective 1 above and beyond Barnett for the next three years.
More than 570 objective 1 projects have been approved, and more than £330 million has been committed. The settlement means that the Assembly and its partners will be able to continue to take maximum advantage of the tremendous opportunities of the objective 1 programme.
This has been a fine spending review for the United Kingdom and Wales. We are putting health and education right. We are giving the Assembly the resources that it needs to put Wales right. The settlement has once again demonstrated the effectiveness of a strong partnership between the Government and the Assembly to deliver results for Wales. There is record public investment that will translate into better health care, excellence in education and safer streets, and that gives confidence
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to our communities and opportunities for further generations.
Mr. Elfyn Llwyd (Meirionnydd Nant Conwy): First, I thank the Secretary of State for his courtesy in supplying me with a copy of his speech.
Today's press is full of the fact that the Chancellor has gambled his billions on the comprehensive spending review. He evidently saw England as an evens bet, but would not consider Wales each way. Despite what the Secretary of State said, we are being short changed by the process. I am interested in his response when, in England, expenditure on health will rise by 7.5 per cent., on education by 6 per cent. and across all Departments by 5.2 per cent, whereas, as usual, Wales comes in with a rise of 5.1 per cent.
Will the Secretary of State confirm that the figure of £492 million, which was mentioned on page 6 of his statement, is all European money without any Government element—I am sure that that is correct? Will he confirm that match funding for European projects must come from the Barnett block, as stated on paragraph 22.4 on page 129 of the spending review? Will he confirm that the education and health budgets of the National Assembly for Wales will have to be expended to cover match funding at the expense of the health service and schools in Wales? Will he confirm that the comprehensive spending review increase in the Welsh Barnett block is proportionally less than the comparable spending programme in England? Will he give a figure for the comparable increase in spending for England?
Does the Secretary of State agree with Professor Maclean of Nuffield college, Oxford—