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The Solicitor-General (Lord Falconer of Thoroton): My Lords, this is an important aspect of the Bill; namely, the funding mechanisms. We had a full examination of these matters in Committee because, in effect, both these amendments appeared during the Committee stage of the Bill. The issues raised by the two amendments concern the framework of the funding mechanism for the new assembly. I hope that I will be forgiven by the noble Lords, Lord Crickhowell and Lord Elis-Thomas, if I do not go into a detailed debate of the present Welsh economy. If I can, I shall focus on the actual drafting of the Bill.
As noble Lords pointed out, particularly the noble Lord, Lord Rees, the present drafting says that,
- "The Secretary of State shall from time to time make payments to the Assembly out of money provided by Parliament of such amounts as he may determine".
- "recognising the needs of Wales in relation to the United Kingdom as a whole".
That is the effect of the amendment of the noble Lord, Lord Roberts of Conwy. The amendment of the noble Lord, Lord Elis-Thomas, says that we should build into that the provision that Ministers of the Crown, in determining how much they should pay to the Welsh assembly, should have regard to the Barnett formula or anything else that replaces it. The noble Lord, Lord Crickhowell, and the noble and learned Lord, Lord Simon of Glaisdale, support both amendments at the same time.
The Government's position, in summary, is this. There is no practical scope for entrenching in the Bill either a kind of rolling needs assessment, as the amendment of the noble Lord, Lord Roberts of Conwy,
suggests, or of the Barnett formula, or whatever replaces it, as the amendment of the noble Lord, Lord Elis-Thomas, suggests.I recognise that these are important issues and, with your Lordships' permission, I shall go into what I submit are the main points in support of the Government's position. First, we have had debates in Committee and again today as to the shortcomings of the Barnett formula. I adopt what was said by the noble and learned Lord, Lord Simon of Glaisdale; that is, that on the last occasion when we debated this, the balance of the argument was overwhelmingly in favour of the Barnett formula being preserved in relation to Wales. Indeed, that was the view of the noble Lord, Lord Roberts of Conwy, and in the course of the Committee stage he made it clear that he did not wish to endanger the Barnett formula in any way.
Lord Roberts of Conwy: My Lords, perhaps I can obtain a clear understanding of this matter from the Solicitor-General. Is he saying that,
- "The amendments would require changes to, or even the complete abandonment of, the Barnett formula"?--Official Report, 9/6/98; col. 923.]
Lord Falconer of Thoroton: My Lords, I believe that the answer is yes. The Barnett formula applies by reference to a formula based on population increases that are to apply in England in relation to public expenditure. The amount of the increases therefore is not based on "need"; it is based simply on the application of a formula.
As a matter of law, it would be impossible for the Minister to say that he is having regard to, or recognising the needs of the people of Wales--I am not sure I have the exact wording--if all he was doing was benefiting from whatever the formula produced. It is a completely different approach. I fear therefore that the answer is that I stand by what I said at the Committee stage.
Lord Roberts of Conwy: My Lords, I am sorry to persist with this point. I am sure that the noble and learned Lord appreciates its importance. Is he saying that the noble Lord, Lord Barnett, is wrong in describing the formula as being based on more than just population; that it is based on the needs of the population? And rightly so, it should be based on the needs of the population. Is he right or wrong?
5 p.m.
Lord Falconer of Thoroton: My Lords, I do not wish to set myself up in any way against the noble Lord, Lord Barnett. The nature of the Barnett formula does not involve, as a matter of practicality, a Minister saying, "What are the needs of the people of Wales? What are the needs of the people of England? Therefore, let us give to each one of those two components of England and Wales that which they need". It is simply, for all the reasons gone into on the last occasion and
today, the application of the formula. I am not sure that the quote from the noble Lord, Lord Barnett, would necessarily involve disagreement with what I am saying. I am sorry that he is not in his place so that he can give an answer himself.As far as the Government are concerned, there is little doubt in their minds that it is a matter of approach to the framework. If the approach that the noble Lord, Lord Roberts of Conwy, proposes in his amendment were adopted, then we would be forced to abandon the Barnett formula. I do not believe that that is what the noble Lord, Lord Roberts of Conwy, wants, I do not believe that that is what this House wants, and I do not believe that this is what the people of Wales want.
Lord Desai: My Lords, perhaps I may help my noble and learned friend in this respect. It is perfectly possible for an economist to say that a population is an indicator of needs, but to put it on the statute book, that needs are to be taken into account, may require to do more than just consider population. That is essentially what one would say, that taking account of population is a way of taking account of needs. It is not needs as such. That would require a much more elaborate formula. Perhaps I am reconciling what my noble and learned friend has said and what the noble Lord, Lord Barnett, said.
Lord Thomas of Gresford: My Lords, it could also indicate his understanding of the wording of Amendment No. 103. I fully understand the words "recognising the needs of Wales", but what does the noble and learned Lord assume is meant by
- "recognising the needs of Wales in relation to the United Kingdom as a whole,"?
Does that mean in relation to the needs of the United Kingdom as a whole, or what meaning does he attribute to it?
Lord Falconer of Thoroton: My Lords, I thank my noble friend Lord Desai for what appears to be a reconciliation of the Government's approach and the approach of the noble Lord, Lord Barnett. It seems to me to be a perfectly sensible way of reconciling the two positions. On the basis of what the noble Lord, Lord Desai, a very eminent economist, has said, there is no real distinction between what I am saying and what the noble Lord, Lord Barnett, has said.
Secondly, I come to the point that the noble Lord, Lord Thomas of Gresford, has raised. What indeed is meant by,
- "recognising the needs of Wales in relation to the United Kingdom as a whole,"?
It is difficult to say what is meant by that. Perhaps the question should be better posed to the noble Lord, Lord Roberts of Conwy, than to myself. Who is to say what are the needs of Wales? It is a subjective matter on which the amendment offers no clues whatever.
Lord Elis-Thomas: My Lords, I am grateful to the noble and learned Lord for giving way. I do not speak for the noble Lord, Lord Roberts, entirely on these matters, but I do speak with one voice with the noble Lord, Lord Crickhowell, this afternoon. We both quoted
the same paragraph, which is paragraph 3.1 of Chapter 3 of the Government's clear document Pathway to Prosperity. Will my noble and learned friend the Solicitor-General, agree that the comparisons between Wales and the rest of the United Kingdom, the rest of the European Union and the rest of the world, in terms of the present performance of the economy, GDP per head and so on, are absolutely objective indicators of the needs of the Welsh economy in society?
Lord Haskel: My Lords, perhaps I may remind the House that we are on Report. The convention of the House is that on Report, once the Minister is speaking, it is not usual for noble Lords to make a second speech.
Lord Falconer of Thoroton: My Lords, I am grateful to the noble Lord, Lord Haskel, for that protection. May I answer the question raised by the noble Lord, Lord Elis-Thomas? I am not taking issue at all with any part of the analysis in Pathway to Prosperity. The point I am raising is what does the amendment of the noble Lord, Lord Roberts of Conwy, mean? I am taking it one stage further and asking what protection it gives to the people of Wales when you are dealing with a concept so nebulous, so ill-defined and which gives such a wide power that it may not really add very much to the existing situation?
Lord Simon of Glaisdale: My Lords, despite what the noble Lord, Lord Haskel, said, may I ask the noble and learned Lord's view? Surely, these two amendments are taken together. In other words, the amendment of the noble Lord, Lord Roberts, is taken together with a reference to the Barnett formula. The Barnett formula includes a reference to deferential income, does it not?
Lord Falconer of Thoroton: My Lords, the essence of the question was that if we take both together you can make it clear that needs equals the Barnett formula, so why do you have a reference to needs at all in those circumstances? You are saying that you can continue to apply the Barnett formula. If that is what you want to do, you do not have the amendment of the noble Lord, Lord Roberts of Conwy, but you have the amendment of the noble Lord, Lord Elis-Thomas. Why should one fall over backwards to have contradictory amendments? With the greatest respect to the noble and learned Lord, Lord Simon of Glaisdale, I do not think that is a sensible suggestion so far as concerns framework.
Perhaps I may go back to the point made by the noble Lord, Lord Thomas of Gresford. I believe, for the reason he indicated in his question to me, that the amendment of the noble Lord, Lord Roberts of Conwy, offers precious little assurance to anyone. The right honourable Member for Wokingham in another place, Mr. John Redwood, certainly had his views of what the needs of Wales were when he was Secretary of State. He had a fondness for returning money to the Treasury which he thought Wales did not need. Who could interfere with his assessment of the needs of Wales? I do not need to dwell on the merits of his approach, save to say that there were many in Wales who did not necessarily agree with it.
I fail to see how the noble Lord's amendment will prevent that, or worse, happening in the future. I submit that the noble Lord's amendment would give the Secretary of State just as must discretion as Clause 80 does now. Combined with its undermining of the Barnett formula, I fear that it would leave the assembly in a very precarious position indeed.
In the light of that and of the noble Lord's comments, to which I have already referred, that he had no wish to imperil the Barnett formula, I hope that he will not press his amendment to a vote tonight.
I turn next to Amendment No. 105, in the name of the noble Lord, Lord Elis-Thomas. I recognise and share the noble Lord's concern about preserving the Barnett formula, as I know do noble Lords on all sides of the House. It is simply a question of how best to do that. I do not go as far as the noble Lord and suggest that the Barnett formula should be reviewed. As is known, and was made clear throughout, there is no intention to review the Barnett formula.
I do not see the amendment of the noble Lord effectively preserving the Barnett formula. If there were any purpose in placing the Barnett formula on the face of the Bill it would surely be to ensure that it continued to be applied. That must involve more than "having regard to the formula", as the amendment of the noble Lord puts it. One can have regard to something but, ultimately, decide not to act on it. A real safeguard would involve giving statutory force to the full block and formula rules. The noble Lord has, of course, not attempted to do so. I have to say that this means that his amendment would also provide scant assurance to anyone.
In any event, enacting the block and formula rules would be a Herculean task. The rules do far more than apply a simple multiplier to an easily discernible sum of English expenditure, as your Lordships will see when we publish the full rules in due course. For instance, any changes in the scope of the Welsh block, such as will arise when the assembly takes on responsibility for the Forestry Commission in Wales, needs to be reflected in the rules as do any changes in the population multipliers.
Even if it were possible to pin the rules down to a statutory form, they would need to be regularly revised for many of the same reasons. That would mean primary legislation on an annual basis once population multipliers are reworked annually from 1999 to 2000 onwards, or else some power to change the formula by order. No doubt your Lordships would see the latter--namely, an order-making power--as preferable for technical matters such as these. That being so, I would submit that the effect would not be greatly different from Clause 80 as it stands. Such an order-making power in the hands of the Secretary of State would give him almost the same discretion over assembly funding.
I appreciate that the Government's repeated resistance to amending this clause may smack unduly of defensiveness. That is not so. I genuinely see no practical alternative to the course we have taken. We have given undertakings that Barnett will remain and that any changes to it will involve full consultation with the assembly. We have published the principles of the
formula and will publish the full rules so that everyone knows what to expect. If noble Lords or Members in another place had devised a workable alternative, we should have been only too glad to consider it. I regret, though, that they have not and I must therefore suggest to the noble Lord that he does not move his amendment.
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