Commission on Devolution in Wales

Debate between Lord Hain and Elfyn Llwyd

Thursday 3rd November 2011 Commons Chamber

[Mr Hain]

I am grateful. The Secretary of State is confirming, then—I am not challenging her on this point—that should there be a derogation in the case of, for instance, stamp duty, that would be taken from the Welsh funding block. That is what I understand her reply to mean.

My second element of disappointment is that the Silk commission will not consider the Holtham commission’s proposals for funding reform in Wales. It was the previous Labour Welsh Government who established the Holtham commission, and it produced conclusive evidence that Wales is now underfunded compared with its needs. As I think both Government parties here in Westminster now acknowledge, it was either naive or cynical of them to promise in their manifestos swift and radical reform of the Barnett formula—a promise that they had to betray after just one week in government.

We are aware that Holtham does not offer a quick solution, and that there would be impacts on the other devolved nations and regions. The introduction of a Barnett floor, which was a Labour manifesto commitment and a proposition featured in the Holtham commission’s two reports, would have ensured that Wales’s position did not become worse. Why have the Government not considered introducing a floor similar to the one that we proposed, which was agreed with the Treasury? It could be implemented relatively straightforwardly, again with the agreement of the Treasury.

The green budget published last year by the Institute for Fiscal Studies entirely vindicated Labour’s approach to the funding of Wales. By showing that the Barnett formula is only now beginning to disadvantage Wales for the first time, it proved that we were right to stick with it until last year, and equally right to proceed with reforming it thereafter. Make no mistake, up until that point the Barnett formula had served Wales well. There is no doubt that had we ripped it up several decades ago, as the nationalists advocated, Wales would have lost out. The collapse of the banks and the scale of the financial crisis suffered by Iceland and Ireland have been devastating to the nationalists’ arguments for fiscal autonomy.

[Mr Llwyd]

I take it that the right hon. Gentleman read the deliberations of the Holtham commission. If so, he will have seen that Gerry Holtham opined that the year-on-year underfunding of Wales went back quite a few years. It is absolute revisionism to suggest that it goes back just to the last year of the Labour Government.

[Mr Hain]

If the right hon. Gentleman looks at the whole Holtham commission report, he will notice that spending was converging with the English average and coming towards the point that it reached last year, when it started seriously to disadvantage Wales. That was the point I was making.