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Lord Davies of Coity: I addressed earlier the amendments put down by the noble Lords, Lord Roberts and Lord MacKay. I think I must have missed something in what the noble Lord, Lord Dixon-Smith, said in respect of his Amendment No. 208. That amendment relates to Clause 83(1), which states:

"The Secretary of State shall for each financial year of the Assembly make a written statement showing--"

The noble Lord wishes to amend paragraph (a), which states:

"the total amount of the payments which he estimates will be made by him for that year under section 82(1)",

by replacing "under section 82(1)" with,

"to the Assembly as approved by Parliament".

With the removal of Clause 82, which is what the noble Lord proposes, what payments will be referred to?

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Lord Dixon-Smith: That question is simply answered. If Clause 82 is removed, so that Clause 83 becomes Clause 82, the Bill would then read:

"The Secretary of State shall for each financial year of the Assembly make a written statement showing--

(a) the total amount of the payments which he estimates will be made by him for that year to the Assembly as approved by Parliament".

That gives a statement of what the payments are; a statement that the Secretary of State will make them; and the authority of Parliament for the payment of those sums. It seems to me that in one simple phrase we encapsulate the totality of Clause 82 and the first part of Clause 83. I suggest that the Bill would therefore be that much simpler, more straightforward and more understandable, which is surely what we should all be aiming for.

Lord Davies of Coity: It seems to me that, if the clause which gives Parliament the authority to provide the money is removed, it will be extremely difficult for the Secretary of State to provide a written statement.

Lord Dixon-Smith: Perhaps we should not continue this exchange.

Lord Simon of Glaisdale: This is obviously an important group of amendments, because if there is any area which is likely to cause trouble, it is finance. All of us want to see this assembly succeed. In view of that there seem to me to be two overriding principles of approach. The first is to eliminate areas of contention and misunderstanding; the second is not to devolve power in any niggardly way.

As for the first, there seems to me to be advantage in the proposal of my noble friend Lord Elis-Thomas to write in the Barnett formula, provided that there is provision--as there is in his amendment--for its improvement. Whatever the position was in the past, in the operation of the Barnett formula we have seen that Wales received less than it should on considerations of comparative need and population. As the noble Lord, Lord Dean of Beswick, pointed out on several occasions, Scotland has done well and, as he never fails to point out, has been considerably better off than the North East of England. The Barnett formula therefore needs to be brought up to date, and that is what the amendment provides for.

I can see no objection to specifying the Barnett formula by name. It is known as such to political scientists, to students of the constitution and to students of public finance. It is a perfectly well understood precept and we should be no more afraid of introducing it than we were afraid of introducing the term "Prime Minister" in the process that took so long before we got round to admitting that there was such a creature in our constitution. Finally, after centuries, it was admitted that there was and that title was admitted to legislation.

We should not be afraid of the Barnett formula. Its advantage is its certainty--that was emphasised by the noble Lord, Lord Dixon-Smith--and its retentiveness; it has stood up to time and does not really admit much room for argument. Although the devolution should be

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in no niggardly spirit, I do not believe that the suggestion of the noble Lord, Lord Davis of Coity, is acceptable; that is, that we should merely say that it should be a payment according to need. That is an open formula which gives ample scope for contention.

Nor, for once, do I agree with the noble Lord, Lord Thomas of Gresford, or the noble Lord, Lord Hooson, although it is even rarer for me to disagree with him. These matters cannot be airily dismissed by referring to "constructive discussion". It is over a quarter of a century since I was a Treasury Minister. But the phrase "constructive discussion" is not what sticks in my memory, and I suspect that the noble Lord, Lord Callaghan, who was First Lord of the Treasury, would bear that out.

The great advantage of the formula is that it limits discussion. Therefore it would be most safe for us to adopt Amendment No. 207A in the name of my noble friend Lord Elis-Thomas. I venture also to comment on the amendment which is rather on its own, Amendment No. 209, tabled by the noble Lord, Lord Dixon-Smith and the noble Earl, Lord Northesk. It is important that everybody should know where they are before the assembly meets.

I have one final query on Clause 82 which the noble Lord, Lord Dixon-Smith, described as "whimsical". Does subsection (1) cover the ground that is at present covered by the Barnett formula? Is subsection (2), those other contributions mentioned, not covered by the formula? In other words, what are the ministerial payments that are not made by the Secretary of State for Wales at the moment?

5.45 p.m.

Lord Callaghan of Cardiff: I regret to say that in my experience the elevated tone of the discussion this afternoon is not reflected in the Bear Garden of the Cabinet at 10 minutes to one before lunch on a Thursday morning when we are arguing about the last £1 million. That was put in a more vernacular and less elevated way than the noble and learned Lord, Lord Simon, puts it now.

When we deal with the realities of the situation, the Secretary of State is protected by the Barnett formula in the sense that he has a fixed ratio upon which he can rely without fighting too hard. He can sit back and watch the Secretary of State for Defence defend himself against the Secretary of State for Education in the Cabinet discussions that take place and say, "However these two chaps fight it out, at least I have got a formula that I know will be of great benefit to me and I have got a fixed amount".

We must have regard to the realities of the situation. The Secretary of State joins in the argument on the side of the Secretary of State for Education; he does not get much out of defence, but he gets an awful lot out of education. I am talking about the reality of the discussions and not, I regret to say, the rational arguments that affect Members of the Committee.

The Government therefore would be ill advised to depart from the Barnett formula. It is a formula that is well known. It gives protection in a different situation

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from the one we have had so far. Whether it works out better or worse for Wales in the long run, I am not sure; that may be argued both ways. I notice that the former Secretary of State, the noble Lord, Lord Crickhowell, appears to agree with me.

Recognising that this Government clearly have, as a major preoccupation, the necessity of ensuring that the national assembly starts well, works well and has adequate finance to carry out its duties, I have little doubt that the Barnett formula will be under no pressure to whittle it away from the Government.

As regards the future, with respect to my noble friend Lord Elis-Thomas, I would not wish to tie us down to a specific formula of that sort. If one has a good Secretary of State for Wales he will have plenty to do. He will have to argue the matter in Cabinet and get the benefit that he can. He will be backed by a very powerful public national assembly which can easily rouse the opinion of Wales for what he is going to do. Therefore, I would not write in firmly the Barnett formula. I remember all the rough and tumble that goes on in Cabinet.

The Solicitor-General (Lord Falconer of Thoroton): In responding to this debate I shall speak to Amendments Nos. 205, 206, 207, 207A, 208, 208A, 208B and 209. As the Committee is aware, all these amendments relate to the financing of the assembly's activities. We are very aware of the importance of Clauses 82 and 83. Therefore, this is a very important debate. I am grateful to be given the opportunity to explain how the financial arrangements are intended to work.

I start by saying as clearly and simply as I can the intentions as regards the funding of the assembly. I hope that I shall put many of the Committee's concerns at rest. The Government made it clear in the White Paper A Voice for Wales that we were committed to retaining the present arrangements for deciding the size of the budget allocated to Wales. We have no plans for a fundamental review of the block and the Barnett formula rules. That formula has been in operation for nearly 20 years and it has been accepted and used by successive governments. We are going further than simply using it; we are making it transparent in its operation. For the first time, last December we published the principles to the block--

Lord Simon of Glaisdale: Does the noble and learned Lord really dispute that the formula is now out of date and that it has operated to the disadvantage of Wales?

Lord Falconer of Thoroton: We do not accept that it is out of date. We believe that it still has considerable life in it. It is appropriate for the present circumstances. As I was saying, we are making its operation transparent. Last December we published the principles to the block and formula arrangements. We shall be publishing the detailed rules in due course. Therefore, as regards the points made by the noble Lord, Lord Crickhowell, it will be clear as to how the sums are calculated.

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It goes further than that because as the noble Lord, Lord Crickhowell has pointed out, Clause 83 of the Bill requires the Secretary of State to publish a written statement for each financial year showing what sums will go to the assembly both from him and from other departments and sources. If and in so far as the sums being paid to the assembly do not fall within the application of the block, increased by the Barnett formula, such as for exceptional items of various kinds, that will have to be made clear on the face of the statements made by the Secretary of State. So the people of Wales will be able to see how the sums are calculated.

We do not believe that the formula gives Wales a disproportionate share of the United Kingdom's resources; it is a purely mechanical exercise based on relative populations. Criticism of Barnett often arises because of confusion between the absolute size of the block and the mechanism for adjusting--

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