UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 1419 -i

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

Welsh Affairs Committee

Wales Office Annual Report 2010-11 and Business Plan 2011-15

Wednesday 13 July 2011

Rt Hon Cheryl Gillan MP, Fiona Adams-Jones, Glynne Jones and Tim Hemmings

Evidence heard in Public Questions 1 - 45

USE OF THE TRANSCRIPT

1.

This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.

2.

Any public use of, or reference to, the contents should make clear that neither witnesses nor Members have had the opportunity to correct the record. The transcript is not yet an approved formal record of these proceedings.

3.

Members who receive this for the purpose of correcting questions addressed by them to witnesses are asked to send corrections to the Committee Assistant.

4.

Prospective witnesses may receive this in preparation for any written or oral evidence they may in due course give to the Committee.

Oral Evidence

Taken before the Welsh Affairs Committee

on Wednesday 13 July 2011

Members present:

David T.C. Davies (Chair)

Stuart Andrew

Guto Bebb

Geraint Davies

Jonathan Edwards

Susan Elan Jones

Karen Lumley

Jessica Morden

Owen Smith

Mr Robin Walker

Mr Mark Williams

________________

Examination of Witnesses

Witnesses: Rt Hon Cheryl Gillan MP, Secretary of State for Wales, Fiona Adams-Jones, Director, Glynne Jones, Deputy Director Legislation and Deputy Head and Tim Hemmings, Head of Policy, Wales Office, gave evidence.

Q1 Chair: Good afternoon, Secretary of State.

Mrs Gillan: Good afternoon, Chairman.

Chair: We have just been noting that the Home Affairs Select Committee was watched in four continents yesterday, so we are hoping that we might surpass that this afternoon.

Mrs Gillan: I very much hope so.

Q2 Chair: I will start by congratulating you on your efforts in making sure that the referendum took place in the way it did, albeit that not everyone was cheered by the result, but there we are. Do you feel, now that Wales has full legislative powers, that that is enough, that they have the tools to do the job, which is what they were asking for before the referendum, and there is no need for further powers of any sort to be devolved to the Welsh Assembly?

Mrs Gillan: Chairman, thank you for that question, but, just before I start, may I introduce my officials who are sitting alongside me? I have my Director here, Fiona AdamsJones, who heads up the Department, as you know; my Deputy Director for Constitution and Strategy, who is Mr Glynne Jones; and my other Deputy Director in charge of Policy, Mr Tim Hemmings. I am very grateful to them for coming here today to answer questions and to ensure that the Wales Office is open to scrutiny.

Thank you very much for your kind remarks on the referendum. I have to say I was particularly proud of my officials and my Department and the way in which the referendum was conducted. I hope that people thought it was conducted in the best spirit of referenda. I know a report has come out from the Electoral Commission and there are lessons to be learned from it, but I think the process went extremely well. That was against the background of coming into office and inheriting no work on the question and a project board that did not include the Welsh Language Board or the Commission itself. I thought it was really important to include them because it meant that the drafting in Welsh and English was done at the same time and, therefore, it had much more integrity as a process.

With regard to the outcome of the referendum, I stayed strictly neutral, which is absolutely right. The outcome of the referendum is for the people of Wales. They have spoken and, indeed, since then we have had an Assembly election. The result-that primary powers have passed to the Assembly for those areas in which they already had devolved powers-is something that this Department is now shaping up to work with and to reflect.

I do not think it is a matter for me to sit in judgment and say absolutely full stop to everything: quite the reverse. We have now entered a period where Parliament and the UK Government need to work out how we best reflect the needs of Wales and how we dovetail into what the Welsh Government do with their primary legislative programme, which the First Minister announced in detail to cover the next five years in the Assembly yesterday.

Q3 Chair: Thank you. Obviously, as democrats we absolutely must respect the result of the referendum and we must now implement that, otherwise we have no right to sit in a democratic place. I fully support what you are doing there. You said that there is no "full stop"; I think that was the phrase you used. But my recollection is that in the runup to that referendum those calling for further powers were very clear in saying, "These are the tools we need to do the job and once we have these tools that will be it." Are you suggesting now that maybe that is not it and that there may be further powers in addition to the ones that were granted by the referendum going to the Welsh Assembly, over nondomestic rates or borrowing powers and so on?

Mrs Gillan: First, I would like to make it very clear that the Wales Office and I, as Secretary of State for Wales, were not responsible for any statements that were made by either the "yes" campaign or the "no" campaign in the runup to the referendum. Quite clearly that is always a matter for those people to engage in. Although I have only had the highlights of the Electoral Commission’s report, I believe that one interesting issue that was thrown up by the referendum is the fact that, because they could not nominate and get the "no" campaign into a position where it was an accepted campaign, they could not recognise the "yes" campaign either. So there were problems in recognising the official "yes" campaign and the official "no" campaign, which will perhaps need to be addressed by a much wider audience than either the Wales Office or this Select Committee.

I am very proud to say that over the past 12 months we have delivered on two out of three of the items in the coalition agreement that were specific to Wales, the first one being the referendum, the second one being the Housing LCO. The third one is work in progress and that is the Calmanlike process that we are embarking on, which really could not be started in any way shape or form until we had not only had the referendum but the Assembly elections, because, as you know, the Assembly elections again changed the political makeup of the Welsh Government, which is now a Labour Government, sitting with 30 Members. We have commenced the discussions on the Calmanlike process, which, if you look back at what Calman did in Scotland, inevitably looks at what happens with the Welsh settlement.

Q4 Chair: Minister, do you think that Wales needs borrowing powers?

Mrs Gillan: That is a question you really should direct at the Chancellor and the First Minister.

Q5 Chair: But what do you think? Do you think we could benefit if Wales starts borrowing lots of money for things? Do you think that that could be beneficial in some way?

Mrs Gillan: As I understand it, and officials will correct me if I am wrong, the Welsh Government currently has very narrow borrowing powers inherited through the WDA. I think that is correct. Mr Jones, could you help?

Glynne Jones: They are very limited, but there are powers via the WDA.

Mrs Gillan: If they have limited borrowing powers, the question for the Welsh Government would be why they have not used them. But, there again, I also think a question for the Welsh Government is, what they would want to borrow for? In the Wales Office, I have no intention of borrowing any money. I live within my settlement, which, as you know, is the money that is withheld from the money that comes to the Treasury and is then passed down to the Welsh Government.

Chair: We congratulate you on doing so but I had better move on.

Q6 Geraint Davies: I have a few quick questions in a few minutes, if I may. First, are you continuing to negotiate with the Welsh Assembly and, indeed, the Department for Transport about pursuing electrification? I know the Prime Minister mentioned it when you visited Wales a day ago. In particular, are you looking at trying to get the Welsh Assembly to apply for European funding and indeed look at the frequencies between Swansea and Cardiff to change the cost-benefit ratio there?

Mrs Gillan: First, Mr Davies, we had this conversation before but I have to congratulate you on the tenacity with which you continue to pursue electrification. I have said that, for me, it is unfinished business. Although we have secured £1 billion-worth of electrification to Cardiff, the Cardiff to Swansea element of the electrification has not been secured yet and, yes, I continue to press on that. But one thing that feeds into that is also the work that my Department and officials are doing with both the Department for Transport and the Welsh Government on the potential for the electrification of the Valleys lines, which is also very important in making sure that we have a modern transport infrastructure in Wales to secure growth and, hopefully, strong inward investment.

Q7 Geraint Davies: Secondly, there is great concern in Swansea-the announcement has not been made-and not just in Swansea but in Devon and Newport and all the way up the Severn Estuary, about the future of the Swansea coastguards. To ensure future confidence for inward investors and tourists on either side of the channel, will you continue to press the case for the Swansea coastguards?

Mrs Gillan: Mr Davies, this Government will never compromise on safety and people can rest assured, but I cannot pre-empt any announcement by another Department at this stage.

Q8 Geraint Davies: Right, but you are happy to submit representations in the knowledge that a decision has been made?

Mrs Gillan: I can assure you my Department has made our views well known on coastguards.

Q9 Geraint Davies: We talked about the Newport passport office at one point, and the Government agreed to do an evaluation of the economic impact of changes. Would you be minded to press for a similar job to be done about the rumours of the closure of the tax office in Swansea? There is great local concern that Cardiff will be protected, as ever, and Swansea and other places are being hit, and perhaps the Government should look at not just the overall saving but how the saving is made in terms of local economic impact. Would you be prepared to look at that?

Mrs Gillan: On the IPS situation in Newport, I was very pleased that in the end we were able to secure 150 jobs. Please do not underestimate in this Committee for a minute how concerned we always are if there are rumours out there. My problem is sometimes that these are only rumours that get spread and as yet, unless officials want to correct me, I have had no indication that there are any proposed closures for that office.

Q10 Geraint Davies: There was a leaked Government document that went to the BBC listing where the cuts would be made in terms of rationalisation of Revenue and Customs-you are being passed a note as we speak. On top of that was the closure of Swansea, so naturally my colleagues and I are very concerned about that. Perhaps you would undertake to have a look at that and maybe make representations so that effects are fair and factor in the economic impact locally. Would that be reasonable?

Mrs Gillan: It is fair to say that HMRC will be doing an impact assessment of any changes that they make to their structures, in any part of the country, but I have heard what you say. As you said yourself, it was a leaked document and you would not expect me to comment on a leaked document.

Q11 Geraint Davies: Finally, if I may, Maria Miller, the Disabilities Minister, announced this week that, following the Sayce review, the future of Remploy was basically up for grabs and there was a view that maybe all the factories would close down. Were you consulted on that? We have talked before in this Committee about Swansea Remploy and other Remploys, and the success of Remploy in Swansea. Perhaps you would like to intervene on behalf of Remploys in Wales to give them your support.

Mrs Gillan: Mr Davies, I do not believe I have had any representations from Remploy that have reached me. It may be that they came to the Department, and I am not yet aware of some of them, but I can assure you that if they come to the Department, I will certainly give them my consideration.

Q12 Stuart Andrew: Secretary of State, the Government is obviously trying to deal with the deficit that it has inherited. What efforts have your Department made to try and reduce costs and make efficiencies?

Mrs Gillan: Thank you very much for that. I am afraid I am a bit of a hard taskmaster and I made myself fairly unpopular with everybody when I first came into the Department because I believe that I was the first Cabinet Minister to insist that all our travel should be standard class. Bearing in mind that we are a very small Department and we have the equivalent of 54.24 full-time equivalents in terms of staff in the Department, there is only so much saving you can make. However, I was determined that we would make savings because that means that, if we make them, we have more flexibility in how we use officials.

I have some figures here for you. We have made a saving on rail travel. In 2009-10, before I took over, the rail travel costs were £172,247 and for 2010-11, my first effective financial year, they were £80,425. That is a saving of £91,821. On accommodation for staff, officials and Ministers, in 2009-10 the expenditure was £34,664. In the financial year 2010-11 it was £22,096. That was a saving we made of £12,568. We are very willing, Chairman, to make all those figures available if you would like to see them.

Q13 Stuart Andrew: Can I turn to the wider economy? Obviously, trying to rebalance the economy is key. What is your estimation of how that is going, particularly looking at growth in the private sector?

Mrs Gillan: Even my predecessor in this position said that the private sector in Wales was too small and we had an overdependence on the public sector, but from what we are seeing I am very optimistic. I have always been a glass-half-full type of person, and certainly, without blowing any trumpets, we have seen good growth in the private sector relative to other years. Certainly, the unemployment figures that came out this morning reflected again that quiet confidence.

Mr Andrew, I travel the length and breadth of Wales and I see the possibilities that we have there. If anything, we can send out this message from this Committee and from all of us who are involved in the welfare of Wales that Wales is a fantastic place to do business. I have been trying to work with the Welsh Government so that people can see that they have two Governments working together in the interests of Wales. We need to make sure that we have the right environment in which businesses can come in. Certainly at the macro level-at the UK Government level-we are doing what we can to ensure that this is the best place to do business, whether it is reducing corporation tax or giving tax incentives to start-up businesses outside the south-east and London and the hothouse areas.

Of course, Enterprise Zones are very important. In England we have already announced several Enterprise Zones, including two that impact on Wales directly in my view. However, money is passed down under the Barnett Formula equivalent to £10 million over four years to go towards Enterprise Zones, if the Welsh Government wants to take that route. I know from my discussions with the First Minister that, whatever they end up being called or whatever shape they take, there is an intention to ensure that Wales is also an attractive place to do business. But I am afraid the jury is still out because our Enterprise Zones in England were announced some time ago and we are still waiting to see what the new Business Minister will do. I had a very good meeting with the new Business Minister on Monday. She received me in her office.

Chair: Really.

Mrs Gillan: I was delighted to meet her. She told me of an encounter with your Committee.

Q14 Stuart Andrew: That brings me to my next question about the engagement of Welsh Government Ministers. Do you have any advice for us?

Mrs Gillan: I would not presume to advise this Committee. I can say, though, quite openly, that I have encouraged her, both on the Floor of the House and when I had my bilateral with her, to rethink because I think the matter is very important. I had regular meetings with her predecessor and we were engaged particularly on looking at inward investment and the trading conditions for businesses in Wales. I always think that this is the instance where you bury any political hatchets and you all try to work together in a team. I know your Chairman and you as a Committee tried to encourage her and maybe she will change her mind. It is a matter for her.

Chair: We would be delighted to see her on 15 September in the Welsh Assembly at a time to suit her. Thank you very much indeed.

Mrs Gillan: It is a pleasure.

Q15 Susan Elan Jones: Good afternoon, Secretary of State. It is very good to see you here. You are absolutely right: the members of this Committee do work together to bury the political hatchet. In fact, only last week I was with the Chair of the AllParty Parliamentary Group on High Speed Rail, Mr Andrew, and Karen Lumley and other members, because we regard this as a very important project for Wales. When you came here last year, we were very pleased to hear you talking about how you were batting for Wales and we were also very pleased to see in the business plan that the Wales Office will "ensure that Welsh interests and needs are reflected in the Government’s improvement to transport infrastructure."

What you said to Geraint Davies was very encouraging about electrification to Swansea, but in your annual report there were no meetings detailed relating to the HS2 project. I would like to know, please, whether you have consulted economists or transport specialists on the benefit of high speed rail for Wales and who you consulted, if so.

Mrs Gillan: Ms Jones, thank you so much for your question on that. I know that you are very interested in this matter. As I think I have said to you before, the Government is undergoing a consultation period on the HS2 project and I am sure that HS2 and the Department for Transport will be looking forward to receiving your input.

I started a business advisory group very shortly after I was appointed and one of the members of that group was a Professor Stuart Cole. He is a transport expert and that is why I had him on the business advisory group. Officials will correct me if I am wrong, but I do not think I have had any representations from him about High Speed 2, and, indeed, I read reports in the media about what he had said about that. I also appreciated that there was some indication that a conflict of interest may be perceived.

All matters to do with HS2 are being handled by the Parliamentary Under-Secretary of State, in line with the Ministerial Code, because I would not want it ever to be thought that there was any conflict of interest. Indeed, when I was the Schools Minister in the last Conservative Administration, of course I was responsible for the schools in my own constituency. In the Ministerial Code we have a way of handling that and that is what we are doing. So, yes, there will be. If you want to make some representations to my Department about this, I am sure that we will make sure that the Parliamentary Under-Secretary of State takes those forward.

Q16 Susan Elan Jones: Secretary of State, what you have just said is very interesting because we know that, when it comes to Welsh questions in the House, you answer questions on all sorts of things, and we enjoy that and we are very grateful for it. But what interests me is the contrast between your views on Wales and on your constituency. I had a look at your very nice personal website and I see that in the last five months you have attended 34 different meetings and events held by groups opposed to HS2, including, intriguingly, one referred to as White Elephant Sunday. Secretary of State, you have also, it seems, hired a lawyer and a councillor to work in your office to oppose HS2. Could I just say that if you are seriously batting for Wales, and I believe that privilege involves a salary of £145,000 a year, do you not accept there is a conflict of interest here?

Mrs Gillan: Ms Jones, I am sure one day you will be a Minister and if you are a Minister-

Susan Elan Jones: But I do not ask to be Minister for the Chilterns; that is the difference.

Chair: Order. These questions have to stay on the topic.

Mrs Gillan: If you are a Minister, you will get the Ministerial Code. Ministers are free to make their views about constituency matters known to the responsible Minister by correspondence, leading deputations or by personal interview, provided they make clear they are acting as their constituents’ representative and not as a Minister. I can assure you, Ms Jones, that anything I do in my constituency and any meetings I hold are to do with my constituency.

Chairman, if I may just answer the thinly veiled attack on a member of my staff, a researcher I have taken on does happen to be a qualified lawyer. I was not aware-

Susan Elan Jones: Mr Vivis.

Mrs Gillan: Yes, Mr Vivis; you are right. I was not aware that there were rules in the House that you were not allowed to take people on to your research staff, employed entirely properly with IPSA’s consent on contracts, and you could be questioned in a Select Committee on that individual. He happens to be a lawyer, I am sure we have plenty of lawyers sitting on this Committee as well. If there are such rules, then you are implying that I am doing something wrong in taking on this member of staff, and I am sorry, Mr Chairman, but that is not correct.

Chair: If I may, I just want to remind all Committee members that the Secretary of State for Wales is here to answer questions about what she does in that capacity, not in her capacity as a constituency MP, which of course we all are. Thank you.

Q17 Susan Elan Jones: Chair, I am not making any attack on the member of staff. I am making an attack on what I believe is a conflict of interest between the Secretary of State in her role as Secretary of State for Wales and in the campaigning role she is taking on in her constituency. The Secretary of State is absolutely right to say that she fulfils certain functions in her representative function, but a Secretary of State is also free to resign if she believes that there is a conflict of interest and I am sure that some of us do.

Mrs Gillan: Ms Jones, I am awfully sorry that instead of questioning me on matters of substance you have decided to resort to this line of questioning. Can I assure you that not only have I complied with the Ministerial Code but that the Cabinet Secretary is satisfied that my conduct is absolutely correct? I feel that this Committee does not benefit from this line of questioning. I can assure you that I have done nothing improper and I do not have a conflict of interest.

Might I just say, Chair, that I hope that Ms Jones is also making representations to her own party and to the Shadow Transport Secretary because she has made remarks saying, virtually, that High Speed 2 is not part of the Labour Party and the official Opposition’s transport plans? I would hope that she is making these representations strongly, if she believes there is so much benefit to Wales, to her own party as well. However, I look forward to receiving Ms Jones’s representation to the HS2 consultation.

Susan Elan Jones: If I could just have a one-word answer-

Chair: No, no. Order. I have to bring other people in and we have exhausted this one at six minutes and 20 seconds. I now call Guto Bebb.

Q18 Guto Bebb: Thank you, Mr Chairman. I would like to bring the Secretary of State back to economic development in the Welsh context because, in terms of the public sector cuts that we are imposing as a Government to get the public finances in order, it is a real concern that we need to rebalance the economy in Wales. I was very glad to see that the Wales Office has appointed an advisory board from the private sector and even more delighted that you have a member representing the tourism industry, who happens to be a constituent of mine. Can you give me any idea of how that Committee’s deliberations have gone to date?

Mrs Gillan: Yes, we have had three meetings to date. We have decided we will hold four a year. The whole purpose of having a business advisory group is to hear directly from business and industry what is happening on the ground so that we can feed into the Prime Minister’s business advisory group so that there is a perspective from Wales.

The meetings have gone extremely well. They have been full and frank in their exchanges with us and we have had the opportunity of bringing in representatives from other Departments to discuss matters with members of the business community and they welcome that first-hand contact. We aim to hold two in Gwydyr House and two in Wales per year. We will review this at the end of the year when we have had our fourth meeting. At the second meeting in Cardiff university I was accompanied by Mr Cable, and having that first-hand exchange between representatives of the business community in Wales with a fellow Cabinet Minister was found to be extremely valuable.

Q19 Guto Bebb: Thank you for that answer. Clearly, you have already stated in a previous answer that economic development is not fully devolved. Even though we have a function in the Welsh Assembly dealing with economic development, it cannot happen in isolation. Is the Committee’s work feeding into the Welsh Assembly’s work in any way? I am very concerned by the fact that the Welsh Assembly has prioritised six areas for economic development in the Welsh context, none of which cover tourism. Therefore, as you have a representative from that sector, is that group’s work feeding into your discussions with the Minister for Economic Development in the Welsh Assembly?

Mrs Gillan: I have to say, Mr Bebb, that at the moment that is an open question. I will explain. When I set up the business advisory committee, the Welsh Assembly Government was a Labour-Plaid coalition Government. Mr Ieuan Wyn Jones was the Deputy First Minister responsible for business development. I offered him and the Welsh Assembly Government, as it was called in those days, a place on the business advisory committee. For the first two meetings of the committee, the representative from the Welsh Assembly Government attended. It was very useful and she was perfectly open about the meetings. She was a senior official, and although the invitation was to Mr Wyn Jones, she was able to feed back anything that came from the business advisory committee. I have extended that courtesy to the new Business Minister and I am not sure whether that invitation will be taken up. Certainly, at my last business advisory group meeting, there was no representative from the Welsh Government, as it is now.

I hope that, again, that could lead to a rethink. In the same way as this Committee has shown prescience and knows that the two Governments need to work together on a matter that is as important as inward investment and business development-albeit that the majority of it is devolved to the Welsh Government-I still believe that the best way forward is to try and exchange views and have the Welsh Government, or a representative of it, as part of the business advisory group. I am not conducting an exercise which is designed to be in competition. Rather, I am conducting an exercise from which we can all learn and through which we can help Wales and the Welsh economy grow.

Q20 Guto Bebb: Finally, you recently responded to a question of mine in the Chamber about a potential Enterprise Zone in Llandudno Junction, which is at the heart of my constituency. The answer you gave me was very positive in that you believed the Welsh Assembly were moving in that direction. Since then there has been a bit of confusion in relation to the newspaper reports and the response you gave my colleague Mr Stuart Andrew. Do you think that clarity will be forthcoming sooner rather than later, because the concept of an Enterprise Zone in the Junction has gained cross-party support in my constituency?

Mrs Gillan: In my bilateral with the Minister for Business I raised the fact that several Members of Parliament across the board, from all political persuasions, had approached me about Enterprise Zones or their equivalent in Wales, and I passed that information on to the Business Minister. I would encourage you to contact the Business Minister, perhaps also in association with an Assembly Member, because I know that the Business Minister firmly believes that her responsibilities lie solely with the Assembly and with Assembly Members. If I was going to offer any advice, it would be that it should be perhaps a joint approach so that we can show that MPs and AMs work together in the interests of Wales.

Chair: I will just bring you back to Geraint Davies, who was admirably brief in his earlier questions, for a quick supplementary.

Q21 Geraint Davies: I will be brief again. On inward investment, again, as you will be aware, we are doing a study and obviously we have been looking at Severn Bridge tolls and electrification tax and everything. Would you be prepared to make a submission on that, perhaps looking at the differences in England and Wales and where there may be gaps-things that we may be missing out on? Part of the Enterprise Zone is this stuff on ports, is it not? At this point, other than the issues you have mentioned about tourism, are there any other issues for Wales where more focus, in your view, should be put?

Mrs Gillan: Mr Davies, can I think about that rather than give you an off-the-cuff answer? I know what this Committee is trying to do and I am really delighted. If there is any help we can give from the Department, we will do that. However, just bear in mind that we are a very small Department. We are refocusing on a five-year legislation programme that has been put forward by the Welsh Government. We have our own responsibilities on legislation going through this House to represent Wales’s view and we have very little slack to be able to do the sort of research-

Q22 Geraint Davies: What about the UK Department for trade and industry?

Mrs Gillan: My principle, because we are small, is that we also try to work and leverage the resources of other Departments. For example, I have worked extremely well with both the Department for Energy and Climate Change and BIS. We will certainly do what we can to facilitate any research in that area, but I do not want to make a commitment that I cannot keep. However, I will come back to the Chair and I will write to you with those areas that we think are of significance and great importance.

Q23 Jessica Morden: In your year as Secretary of State, in terms of working with other Departments, how are you working with DWP and what meetings have you had with what organisations about the impact of welfare reforms on Wales?

Mrs Gillan: First, as I said, it is important to work with other Departments. I do not know whether you have had a chance to look through the annual report and see the list of visits and so on that we have made. I spoke to the Secretary of State for Work and Pensions quite early on. I am not sure whether this sort of detail is in the report, but we have had officials in from DWP to brief us on the situation in Wales specifically. It is really important to bear in mind that, although what happens with work and pensions is not the responsibility of my Department, I need to make sure that I am in close contact because welfare reform has such a significance in Wales.

Q24 Jessica Morden: I have looked through the Wales Office annual report and there is an admirable list of visits, but there does not seem to be much detail in terms of looking at a set of Government policies that are going to have a huge impact in Wales. If you look, there are about 242,000 people on DLA and about 180,000 people on incapacity benefit. Has the Wales Office made an assessment of the impact of all these welfare changes on people in Wales?

Mrs Gillan: That assessment would be made in DWP. We do not have the officials-the experts-to do that. When you have a Department that has only 54.24 full-time equivalents, I am afraid that we do not have those completely specialised policy officials. I appreciate that there are impacts on people in Wales and we have looked at the Work programme and the Disability Living Allowance. The Secretary of State himself has been to Wales twice-in fact I think yesterday, when attending the Cabinet meeting in Wales, he told me that he had done four or five separate visits, and when I accompanied him last time he did several visits. May I ask Mr Hemmings if he would just elaborate a bit more on what officials do on Work and Pensions collaboration because that would be helpful?

Tim Hemmings: We have regular meetings with the Department for Work and Pensions, both looking at the analysis of the employment situation throughout Wales and action that can be taken. There is a regular forum that looks at those matters with the devolved Administration. We also have very close links with Jobcentre Plus. So, as the programme is worked out, the Jobcentre Plus organisation in Wales will provide us with data on takeup of Work programme initiatives, changes that need to be made and the impact of Government policies there. However, although we have those meetings regularly, the impact is just starting to be felt because of where we are in the timing.

Mrs Gillan: Can I just add a couple of other things because the matter is quite important? I thought this was so important for the business advisory group that I had my colleague the Secretary of State for BIS come to its second meeting. To the third business advisory group meeting, I had my colleague Mr Grayling come and talk through what was happening on that front. As Mr Hemmings has said, I have met Jobcentre Plus several times. I was really impressed with what Jobcentre Plus was doing with pre-employment training as well.

Q25 Jessica Morden: May I just ask you one more question? Could you ask DWP to do a full assessment of the impact of all the welfare reforms on Wales and then share that with us? The Sheffield Hallam report that came out last week basically said that tens of thousands of people were going to come off incapacity benefit and would be out of work with no jobs to go to. We are talking about 70,000 jobs being needed in the Valleys. You said earlier that you were an optimist in terms of the private sector picking up that slack. You would have to be incredibly optimistic to work out where those thousands of jobs were going to come from. Could you have a look specifically at that?

Mrs Gillan: I have to be incredibly optimistic when I consider and look at the figures that pertained when we came into Government. I will discuss with my Department whether we have the capacity to carry out that work, but I also suggest that you address your inquiry to the Department for Work and Pensions, which carries out that line of work.

Q26 Karen Lumley: Good afternoon, Secretary of State. A year has gone by quite quickly now. What do you think are your key achievements in the first year of being the Welsh Secretary?

Mrs Gillan: First, I would say delivering two out of the three coalition agreement undertakings. Do not underestimate how much time it took to deliver the referendum and, of course, to negotiate on the Housing LCO, which had been held up for many years in this place. Moving on, looking at the Calmanlike process, however that evolves, will make up part of the work. However, I have been particularly proud, and I say this with officials sitting alongside me and behind me, of the work that my officials have done.

When I walked into the Wales Office, it was a very different place from what it is today. Half the ground floor was held up by reinforced props. We could not use half the ground floor; we could not have more than 12 people in my office; there was gaffer tape holding parts of the carpet together. It looked run down and it was not the best thing for Wales. We have turned it round as a team, and there is a real team in Wales. We have given it focus. We have a business plan which is a living document, which we can adapt and move forward. We have been flexible about people’s expectations. We have really good relations with the First Minister and with the Welsh Government on which I would like to build because that is also essential. There is a different spirit.

I am not going to ask my officials to add to that, but I hope that they would agree because it is important that we recognise that devolution is a very important part of the makeup of the United Kingdom. However, I want Wales to remain firmly in the United Kingdom and have the benefit of having a UK Government working in its interests with a Welsh Government working in its interests. So I hope that we are moving towards achieving that. It is by no means perfect but it is moving forward.

Can I just add, though, the other thing that I am really proud of is that we have secured £1 billion worth of rail electrification? We have announced just under £60 million for broadband. We secured the year end funding which gave the Welsh Government flexibility, and we are continuously looking at how we can improve the situation in Wales.

Q27 Karen Lumley: How much time do you spend in Wales?

Mrs Gillan: I am there once or twice a week.

Q28 Karen Lumley: Excellent. Going back to inward investment, obviously we are undertaking this inquiry and some of the evidence that has been given is quite worrying because inward investment has constantly fallen in Wales-than in the rest of the UK. Are you quite clear and satisfied that we have the appropriate skills in Wales to attract inward investment?

Mrs Gillan: This is where devolution takes over because, of course, the education and skills programme is entirely a devolved matter for the Welsh Government. We cannot escape some of the outcomes of the educational programme and I am very much hoping that, with the legislative programme that has been announced by the Welsh Government, there will be improving standards in the education sector in Wales.

Q29 Owen Smith: Welcome, Secretary of State. I have some substantive questions but I cannot help but say did you mean it a moment ago when you said you were particularly proud of sorting out the gaffer tape on the floor and recarpeting the Wales Office?

Mrs Gillan: Mr Smith, I will let you have the pictures of the office. Perhaps you will enjoy looking at them.

Owen Smith: Okay then.

Mrs Gillan: Can I just say that I think officials and people deserve to work in decent surroundings? Even our front entrance wall was not DDA compliant.

Owen Smith: The previous incumbent was obviously very careful with Government money in respect of furnishings.

Mrs Gillan: We have been very careful with Government money. Two of our cabinets were obtained free from the Department of Health and our threepiece suite was also obtained free from across the road from the Scotland Office.

Q30 Owen Smith: That is admirable. Is it true, Secretary of State, that Wales Office officials recently met the Boundary Commission and political parties in Wales and said at that meeting that they were looking for a legislative vehicle to address changing the boundaries of the Assembly constituencies in Wales?

Mrs Gillan: I think Mr Edwards raised the matter with me on the Floor of the House. He raised the change of boundaries and in the number of parliamentary seats that will be going through in Wales and how that will affect the Assembly boundaries and any future shape in Wales. As far as I am concerned, we will have to look at that because I agreed with the First Minister before the last Assembly elections that we would decouple the Assembly boundaries from the parliamentary constituency boundaries, and therefore if any meetings have taken place they are quite right and proper because it is my duty to have a look at what possibilities exist and what options there would be.

Owen Smith: So it is true.

Mrs Gillan: Can I just ask officials if a meeting has taken place?

Glynne Jones: I have not had any such meeting, but, as the Secretary of State explains, the break between parliamentary constituencies and Assembly constituencies in the Parliamentary Voting Systems and Constituencies Bill means that there has to be a mechanism put in place.

Mrs Gillan: Can I also just-

Owen Smith: Can I ask another question, with respect?

Mrs Gillan: No, no.

Chair: We are only here for another half an hour. If you can spend a bit of extra time afterwards, that would be fine.

Mrs Gillan: Can I just make the point on the Boundary Commission because, if any of my officials had met them, it is quite right and proper that they should do so?

Q31 Owen Smith: It was certainly news, obviously, to us that the Government was actively pursuing a legislative vehicle to change the boundaries for the Assembly constituencies in Wales, not least because during the Parliamentary Voting Systems and Constituencies Bill, Ministers were at pains to point out that this was not really going to affect Wales. That is the point I am making.

Mrs Gillan: You are leaving the Committee with the wrong impression.

Owen Smith: I am leaving them with an accurate impression.

Mrs Gillan: No. Anything that my officials did looking at this would be entirely right and proper bearing in mind that I agreed with the First Minister that we would decouple those boundaries from the parliamentary constituency boundaries. So anything is quite right and proper.

Q32 Owen Smith: With respect, the logic of decoupling does not necessarily lead on to then changing the boundaries in Wales. Your Government absolutely said that you would decouple, but you also said that this was not effectively affecting the constituencies of the Assembly. We now know that it is going to. Is it also true-

Mrs Gillan: That is not correct.

Chair: Minister, please. Let Mr Smith ask his question and then I will give you a chance to speak.

Owen Smith: It is my interpretation of what you have done-

Mrs Gillan: It is your interpretation; that is correct.

Owen Smith: And, therefore, I think accurate.

Mrs Gillan: The arrogance!

Q33 Owen Smith: Is it also true that your preferred proposal, as I understand it, is to go to what is called 3030? In order to achieve coterminosity between the 30 parliamentary boundaries, you go to 30 past the post seats in Wales and 30 list seats. Is it not true that, if you were pursuing that, it would benefit the Tory party significantly and other opposition parties in Wales and, therefore, is it not more gerrymandering?

Mrs Gillan: Mr Smith, as I say, it was raised on the floor of the House by Mr Edwards. I said I would look at it very carefully. It is very interesting. I have reached no conclusions whatsoever. Can I just assure this Committee that before anything goes forward to do with boundaries there would be a loud, long and large period of consultation? I think you are jumping the gun. Mr Smith, if you do not mind my saying so, you are setting a hare running when no hare is even in the field yet. We are doing the correct and responsible thing in the Department and we will continue to do so, but I would be very interested in your views.

Q34 Owen Smith: The hare was raised by your officials in the meeting and by you on the Floor of the House, with respect, Secretary of State. I do not think I am raising it. But I am pleased to hear you say there would have to be a long period of consultation. Is it not true that you would need either to seek a mandate at a general election or through a referendum if you were to pursue such a radical change as going to 3030, as all previous such changes to the governance of Wales have either been mandated through a manifesto at a general election or in a referendum? Would you not need to pursue the same course?

Mrs Gillan: Mr Smith, when we have any information gathered in the Department on this subject, I will share it with the Committee. At the moment I have no such plans within the Department.

Q35 Owen Smith: But do you not have an opinion about whether there ought to be a referendum on something as significant as changing the nature of the voting system for the Assembly?

Chair: Final question.

Mrs Gillan: Mr Smith, I would rather take things in the proper fashion at the proper speed. I am still considering the original proposal that was put forward by Mr Edwards.

Q36 Mr Walker: Secretary of State, I was struck earlier by your comment about seeing possibilities the length and breadth of Wales. Returning to the subject of the economy, how important to those possibilities and to the outturn for the economy do you think that the roll-out of broadband will be, particularly rural broadband in the more remote areas?

Mrs Gillan: It is really very significant. People always think about physical infrastructure as being roads and rail, but broadband is now of such significance and there has been some progress in Wales. We announced earlier in the year £10 million, but, as you know, this week that has been increased to just under £60 million. Again I will ask officials to correct me if I am wrong because I have to cover a vast range of areas, but what will happen is that it will be a project-by-project approach and it has to be match-funded through the Welsh Government, but that matched funding could come from convergence funds because the convergence criteria were changed to allow broadband infrastructure to be part of it. So there will be the opportunity for the Welsh Government, if they wish, to use convergence funding on this and we very much hope that we will have that high speed broadband rolled out by 2015.

Q37 Mr Walker: To what extent has that announcement this week been as a result of the tripartite engagement that we have seen between your Department, the Welsh Assembly Government and the DCMS?

Mrs Gillan: I am pleased to say that we have started to improve the whole communications setup in government as far as Wales is concerned. When I was in opposition I was very keen to set up a group of Ministers in each of the Department areas-Shadow Ministers as they were then-to try to make sure that Wales, Scotland and Northern Ireland had a strong voice in each Department, because, whether it is devolved or nondevolved, everything that a Department does at UK Government level will have some impact or some consequence in the devolved Administrations. I am very proud that we have now set up that Cross-Departmental Committee, which is a Devolution Committee of Devolution Ministers. Every Department now has somebody in their ministerial team who comes to the Devolution Ministerial Group and we have met twice already.

What is more important is that there is a huge underpinning of that Ministerial Group by senior officials in each Department. So it is not just at ministerial level; it is underpinned by official level. Part of our mission as the Wales Office is to make sure that the specific needs and requirements of Wales are fully understood in each Department. This, I hope, will start to contribute to it.

Q38 Mr Walker: You spoke earlier about leveraging the resources of other Departments. Does the approach that has been taken with the DCMS announcement of a matched-funding approach have the potential to be used with other Departments in other areas when it comes to infrastructure investment?

Mrs Gillan: I am not familiar with the DCMS announcement that you have just alluded to, forgive me.

Mr Walker: This is the £60 million figure that has been announced-the potential for matched funding with the Welsh Assembly Government.

Mrs Gillan: The matched funding, no. The total that DCMS announced was £530 million right across the whole of the United Kingdom. What is really good is that the amount coming to Wales is based on need, not based on what they would get if it was a Barnettised formula. Certainly, we had a broadband summit in the Wales Office, which then led to the way in which we have done business on this matter. But it is important that we always keep that axis of Welsh Government, Wales Office and the Department because we can then provide better coordination.

I was looking at a freedom of information request that came on material from the last Administration, and one of the biggest risks to not doing the best possible job for Wales is when other Departments do things without keeping the Wales Office in the loop. So we try to keep the Wales Office in the loop because that is quite key to doing the best job for Wales.

Q39 Jonathan Edwards: Can I just come back quickly to the proposed Calman Cymru process? My understanding is that the coalition agreement promised a Welsh Calmanlike process if the referendum was won. Following that conclusive result and questioning on the Floor of the House, Ministers have said that the terms of reference for the Calmanlike process for Wales will be announced prior to the House rising for recess. I am aware that the Prime Minister made a statement in the National Assembly earlier this week. Was that the statement we were promised?

Mrs Gillan: Mr Edwards, that is one of the statements we were promised. I was talking to your party leader Mr Ieuan Wyn Jones only this afternoon about that and also to the leader of the Liberal Democrats, and I will be talking later to the leader of the Conservative Party and to the First Minister again. We are still working on those and I do not want to pre-empt anything that is going to come out, but we are looking at working on a cross-party basis on this.

Jonathan Edwards: I am glad to hear that positive answer, but can I just press you slightly? The Scottish Calman, under the title "Strengthening the Devolution Settlement", looked at the constitution and institutions; culture; charities, sport and gaming; employment and skills; energy; environmental planning; health and biosecurity; justice and home affairs-

Chair: Order. The Committee has to be adjourned for 15 minutes. I am sorry about that. Those are the rules.

Sitting suspended for a Division in the House.

On resuming-

Q40 Jonathan Edwards: I will try again, Secretary of State. The Scottish Calman looked at a number of different areas and not just the finance. I will just list them quickly for the record. It looked at constitution and institutions; culture; charities; sport and gaming; employment and skills; energy; environmental planning; health and biosecurity; justice and home affairs; marine and fisheries; revenue and tax freezing; science research and higher education; social security; trade and commerce, among other areas as well.

However, the Prime Minister’s statement earlier this week in the National Assembly seemed to indicate that the scope of the review would be limited solely to finance. Would that not mean that the review should not be called a Welsh Calman? It should be called something else.

Mrs Gillan: First, may I just say that I am really very pleased that the Prime Minister was addressing the Assembly? That really was a very significant step forward in the Respect Agenda that we have set between our two organisations. In the spirit of the Respect Agenda, I do not want to pre-empt anything that may be finally agreed, but I would like to point out that there is a fundamental difference between the Scottish settlement and the Welsh settlement. Indeed, the Calman Commission was set against the reviewing of the 1998 legislation, as I believe, whereas in Wales we have had what is referred to as GoWA-the Government of Wales Act 2006-which has already led to the referendum which took place earlier this year. So it is a different set of circumstances. The settlements were always asymmetrical, but I hope, Chairman, you would understand on this Committee that it would be wrong of me to pre-empt the outcome of any discussions that are going on, and the Prime Minister’s statement that he made in the Assembly obviously stands at the moment.

Q41 Jonathan Edwards: Just two quick questions, if I may, Chair. Some of us have seen that the work on finance has already been done with the Welsh Government-sponsored Holtham Commission. Only last week the four parties in the National Assembly seemed to have signed up to my party’s economic policy calling for a Barnett flow, Barnett reform, borrowing powers, bonds via capital markets and taxation powers. There seems to be a consensus there already. Is there really a need for a detailed investigation into how the Welsh Government is funded?

Mrs Gillan: I have met Gerald Holtham on a number of occasions. Indeed, he came and talked through his report to an audience in Gwydyr House not so long ago. There is no doubt that Gerald Holtham carried out a fine body of work, but I understand that there are differences of opinion as to what parts of Holtham should, if anything, come to fruition. Again, I do not want to pre-empt the outcome of ongoing business, but I would be very willing to let the Committee or you, Mr Edwards, know-although I am sure you will know soon enough-what the outcome is, how it is going to be shaped and what the terms of reference will be.

Chairman, with the advantage of having my officials with me, I think I inadvertently alluded to the Barnettised money on Enterprise Zones being over a period of four years. It is of course five years. I would not want that to stand on the record without being corrected.

Q42 Jonathan Edwards: Lastly, when do you expect the Welsh Calman process to complete its work?

Mrs Gillan: I really do not know the answer to that question, Mr Edwards. Again, it will depend on the scoping of the Calmanlike process.

Jonathan Edwards: Will it be before the end of the Parliament?

Mrs Gillan: Really, if I could tell you I would. It is envisaged to be before the end of the Parliament, before 2015. I can go as far as saying that. But at the moment I just really do not want to jump the gun when we have ongoing discussions.

Q43 Mr Williams: I am sorry, Mr Chairman, to have missed the bulk of the session and apologies, Secretary of State, for missing your answers earlier. I have one question relating to the Public Bodies Bill and on this occasion, it is not about S4C but about Consumer Focus Wales. Has your Department had any discussions with Consumer Focus Wales about one of the propositions they are putting forward in the form of an amendment to the Public Bodies Bill, namely, with the transfer of functions from Consumer Focus to Citizens Advice, not asserting that we should have more powers going to the National Assembly but that it should have the capacity to establish its own organisation? I am just wondering what thoughts you have had on that. Consumer Focus have told me they have been in touch with the Wales Office or will be, and there have been some discussions with BIS about the possibility of an amendment.

Mrs Gillan: Thank you for that question, Mr Williams. Two of the representatives of Consumer Focus Wales came in to see me. I listened to what they had to say and subsequently they wrote me a letter enclosing their proposed amendments to the Bill. Those went forward from my officials to the other Department. I do not know whether we have an update on that, Mr Hemmings or Mr Jones.

Glynne Jones: It is timely because we are meeting the Welsh Government and BIS officials next week to discuss just this issue.

Q44 Mr Williams: There has been a certain amount of lobbying from some of us to BIS Ministers and the support of the Wales Office on this would be really much appreciated.

Mrs Gillan: We have been taking the matter forward because I am familiar with some of the work of Consumer Focus Wales and I think that they do a first-class job.

Q45 Mr Williams: Also, I am not denigrating the work of CABs across Wales-far from it-but there is a patchy structure of CABs across Wales as a whole, and, as you say, the work of Consumer Focus Wales lends itself very well.

Chair: Minister, you have given us slightly more of your time than we had agreed because of that vote. So I would like to thank you for coming along here today and giving us evidence. I call this meeting to a close. Thank you.

Prepared 19th July 2011