Government of Wales (Devolved Powers) Bill [HL]

Debate between Lord Davies of Gower and Lord Hain

2nd reading
Friday 28th October 2022 Lords Chamber

[Lord Hain (Lab)]

My Lords, I strongly support the Bill and congratulate my noble friend Lord Wigley on bringing it forward. The devolution settlement in Wales is being systematically sabotaged by this Government. Their decision to bypass the Welsh Government and directly allocate funding for regional and local development via UK-wide funds is a clear assault on Welsh devolution and fails to meet repeated EU referendum promises that Wales

“will not be a penny worse off”

outside the European Union. Ministers plan to leave Wales with less say over less money in an era of aggressive centralisation. The UK Government’s financial assistance powers under the United Kingdom Internal Market Act are designed to usurp functions that sit within the competence of the Welsh Government and the Senedd. Although these powers should never have been enacted, surely they should be used only in a way that has been agreed with the Welsh Government.

Conservative Ministers have overridden the Sewel convention on several occasions in recent years, disrespecting the views of Senedd: first, over the then European Union (Withdrawal Agreement) Bill in early 2020, then through subsequent breaches without even seeking to offer a justification. An example of breaching Sewel was for the United Kingdom Internal Market Act, which, as constituted, means that laws made for England will—with some exceptions and exclusions to be negotiated—have the potential to undermine laws made in Wales applying to goods and services in the same sector, for example on food standards and climate emergency measures.

Economic development has been a clearly defined area of devolved responsibility at every stage of devolution in Wales from 1999 onwards; when I was a Welsh Minister, I helped to establish a Welsh legislature in the Government of Wales Act 1998, and subsequently did so as Secretary of State for Wales in the Government of Wales Act 2006. This area—economic development being devolved—has been respected by every Administration in London for more than 20 years. The current Administration, however, have chosen to use the powers in the United Kingdom Internal Market Act to intervene directly in the Welsh economy by means of the shared prosperity fund and the wider levelling-up agenda, with the express stated purpose of giving the UK Government a higher profile in Wales.

The Welsh Government were excluded from any meaningful involvement in the decision-making processes for these funds; such engagement as there was by the UK Government was superficial, late and limited in its scope. For example, the decision to bypass Welsh Ministers is an overt and deliberate disregard for the constitutional settlement approved by successive referenda and opens the door to progressive, incremental repeal of the devolution settlement with no debate and, more importantly, no consent from the people of Wales.

Moreover, under this Tory Government, Wales has been hit by a tsunami of cuts. According to Lords Library figures, there has been an 11.3% real reduction in the Welsh block grant from 2010-11 to 2018-19, going from £19.4 billion to £17.2 billion. This means that the 11.3% real cut in the Welsh block grant was proportionately much bigger than the 7.2% real cut in overall UK public spending over that period. Tory austerity hit Wales harder than it hit the UK as a whole. Between 2010-11 and 2019-20, the Welsh Government’s budget for day-to-day spending per head of the population fell by 6% in real terms, or more than £300 per person. Despite recent increases, the Welsh Government budget in 2024-25 will be £3 billion lower than if it had grown in line with GDP since 2010-11. Overall capital funding falls in cash terms in each year of the current three-year spending review period and will end up 11% lower in 2024-25 than in 2021-22.

However, the economic context against which the Welsh Government agreed earlier this year the budget and multi-year spending review for 2022-25 has changed profoundly, as we all know, and is now significantly worse. In real terms, and owing to inflation, the Welsh Government’s budget is now worth at least £600 million less than when they set out the spending plans. The Welsh Government have asked the UK Government to update their spending plans in line with inflation but they have so far declined to do so. I urge the new Prime Minister and Chancellor to provide significant extra emergency funding for the Welsh block grant.

[Lord Davies of Gower (Con)]

Can I just remind the noble Lord of the five-minute speaking time?

[Lord Hain (Lab)]

I will try to finish as quickly as I can.

The Welsh Government, together with the other devolved Governments, have also been pressing the UK Government for greater flexibilities to manage their budget. Their modest proposals include the automatic ability to carry forward late in-year block grant changes into the following financial year. This would provide more time for devolved Governments to adapt plans to accommodate those changes.

The devolved Governments have also called for increases to limits on borrowing and cash reserves. They face different risks to UK government departments and require more autonomy to act as controllers of their own public spending. The current arrangements can lead to very late changes in budget allocations to accommodate changes in funding driven by circumstances in England rather than in Wales.

Then there is the damaging impact of Brexit on Wales. It was allocated up to £2.1 billion between 2014 and 2020 by the EU’s European Regional Development Fund and European Social Fund. These would have been worth £1.4 billion between January 2021 and March 2025; in fact, there has been a massive shortfall of £772 million on that figure, so Wales has been short-changed in every respect—and that is without the impact of the loss in rural funding as a result of the shortfalls in EU structural funds, which add up to more than £1 billion.

All in all, the idea of making Brexit work for Wales has simply been a myth. It adds up to shabby and arrogant treatment of Wales by this Government; I appeal to Ministers to stop it.