Devolved Administrations: Financial Flexibility

Lord Wigley Excerpts

Tuesday 8th November 2011 Lords Chamber

Asked By

[Lord Wigley]

To ask Her Majesty’s Government what discussions they have held with the devolved administrations concerning the future working of year-end financial flexibility.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, my right honourable friend the Chief Secretary to the Treasury announced on 18 July that the Treasury has agreed with the devolved Administrations that a modified version of the budget exchange system will apply to their underspends during the spending review period. The devolved Administrations will be able to carry forward DEL underspends up to a maximum of 0.6 per cent of resource DEL and 1.5 per cent of capital DEL from one year to the next.

[Lord Wigley]

My Lords, does the Minister agree that it is much more prudent for the devolved Administrations to carry forward, as a capital sum, any money that is unspent at year end rather than to rush to spend it? Given that the Assembly Ministers, as he said, have agreed with the Treasury a formula for devolved Administrations to carry forward underspends within these defined limits, why was the Treasury insisting on denying to Wales, and to the National Assembly, some £400 million of accrued underspends in Wales, money which Parliament had voted for use in Wales and which had been accumulated on a formula previously agreed with the Treasury? Will the Minister now discuss with his Treasury colleagues the possibility of releasing that sum over the next two years to augment the National Assembly’s much depleted capital resources?

[Lord Sassoon]

My Lords, sadly, the previous Government left us with a pot of money of some £20 billion which had been unspent by departments, which, if now spent, would simply increase our deficit; it would increase the stock of debt by £20 billion. It was necessary for the Government, as part of our deficit reduction strategy, to cancel that EYF, but the stock of cancelled underspends in the devolved Administrations was 8.4 per cent of the total, compared with 15 per cent of expenditure, which the devolved Administrations represent, so what they were prevented from spending was rather less proportionately than applied to the United Kingdom as a whole.