Barnett Formula

Lord Wigley Excerpts

Tuesday 17th December 2013 Grand Committee

[Lord Wigley (PC)]

My Lords, I thank the noble Lord, Lord Shipley, for facilitating this debate. I identified with many of the points that he made. I also join the noble Lord, Lord Jones, in his comments about the late Wyn Roberts, whom we all miss very much.

I am glad this opportunity has arisen to comment on the LGA’s submission on the Barnett formula in the context of the Autumn Statement. There is only time to make a few benchmark points today, but it is worth noting that the LGA is working on alternative funding proposals, which will be published, I believe, next summer. I welcome that, although I hope they will consult both the WLGA and the devolved Government in Wales in taking that forward. The implication is that there should be mechanisms for distributing resources according to need within England as well as within the UK.

Noble Lords will be aware of the grave dissatisfaction that has existed in Wales for many years with regard to the inequity of the Barnett formula. The report of the Select Committee on the Barnett Formula in the House of Lords in the 2008-09 Session,

“concluded that the Barnett Formula should no longer be used to determine annual increases in the block grant for the United Kingdom’s devolved administrations”.

It added the pertinent comment:

“The Barnett Formula also takes no account of the relative needs of any of the devolved administrations”.

The Holtham commission, which investigated these matters in Wales, produced two assessments. The first, on the basis of the formula used within England to distribute resources, estimated that Wales was underfunded in 2010-11 by some £300 million. The second independent assessment identified a £400 million shortfall. The Silk commission, which reported on possible changes to the financial powers of the National Assembly, agreed with Holtham in its analysis. The Holtham commission set out, as an alternative to the Barnett formula, parameters for a needs-based formula which included the number of children, the number of older people, ethnicity, income poverty, prevalence of ill health and sparsity of population.

The conclusions of the House of Lords Select Committee to which I referred spelt out as parameters the age structure of the population, low income, ill health and disability, and economic weakness. To that extent, the House of Lords Select Committee, the Holtham report and the Silk commission were moving in the same direction. The LGA in its paper recognised the significance of looking at,

“the total identifiable public spending”,

and states:

“Scotland is overfunded by £4.4 bn”,

although this appears to be on the basis of Scotland’s fiscal and macroeconomic position, not on the basis of any detailed analysis of Scotland’s needs, which seems perverse.

Of course, if Scotland votes for independence it will fund the entirety of its services from taxation raised by the Scottish Government. Independence, to that extent, would bring to an end any feeling, rightly or wrongly, that Scotland is being overfunded at the expense of England. Perhaps Scottish independence will solve the problem that is bugging some colleagues here today. I do not suppose that they would support a yes vote, however.

Whereas the LGA in its paper purports to represent councils in England and Wales, it pitches its arguments solely in the context of England. It opens with the words:

“English communities are being short-changed by as much as £4.1 billion a year”.

It makes no reference in its text to the fact that Wales also is being underfunded on that basis and, presumably on the LGA’s own logic, should be receiving £300 million or £400 million a year more to put this right. Here I must note that the WLGA, which represents Welsh local authorities, while supporting the LGA’s call for a needs-based formula, has said that it,

“certainly cannot support the idea of decimating Scottish local government expenditure to achieve this, or having the entirety of any redistribution of funding to be spent solely in England on social care”.

Is the decimation of Scottish local government the alternative that Scotland faces if it votes no next September?

In conclusion, I very much support the thrust of the LGA’s approach, although the details need much further consideration. I hope, however, that all UK parties will make a pledge in their manifestos for the 2015 election to introduce a needs-based formula for distribution of resources.

[The Duke of Montrose]

From the study that the noble Lord has made, perhaps I may ask him whether the shortfall that the LGA was talking about is based purely on equality of distribution, or took into account the Holtham needs-based formula.

[Lord Wigley]

The table that was published, which I do not have time to go into in detail, referred to, “Identifiable public sector expenditure”, which is a different concept from that which is attributed by Barnett and needs analysis in its own right.

Welsh Government: Comprehensive Spending Review

Lord Wigley Excerpts

Thursday 4th July 2013 Lords Chamber

Asked By

[Lord Wigley]

To ask Her Majesty’s Government what discussions they have had with Welsh Government Ministers about the effect of the Comprehensive Spending Review on the delivery of devolved services in Wales.

[Lord Newby]

My Lords, Treasury Ministers and officials have regular discussions with the Welsh Government on a wide variety of topics. Finance Ministers from the devolved Administrations met the Chief Secretary in Belfast on 3 June to discuss the forthcoming spending round. We have also received a joint written representation from all three devolved Administration Finance Ministers.

[Lord Wigley]

My Lords, is the Minister aware that Wales has the lowest level of GVA per head of any nation or region in these islands? Does he also accept that the key to regeneration is infrastructure investment, particularly to stimulate local economies? Why was it then that, in the review last week, while Scotland and Northern Ireland received an increase of 2.7% and 1.5% respectively in their capital DELs—departmental expenditure limits—Wales received a paltry 0.3%? As Anglesey has had the lowest GVA per head of any county in the United Kingdom during the past decade, will the Government now find capital funding for a much needed new road bridge over the Menai Strait to Anglesey, both to improve the traffic bottleneck there and to stimulate economic development on the island?

[Lord Newby]

My Lords, as the noble Lord said, the Welsh Government’s capital budget for 2015-16 will increase by 0.3% in real terms, but that is only part of the story in terms of government capital expenditure in Wales. As he knows, south Wales is set to benefit from the electrification of the main line to Swansea and of the valley lines. He will be aware also that the Government have committed to spending £0.25 billion on a major new prison in north Wales.

Spending Review

Lord Wigley Excerpts

Wednesday 26th June 2013 Lords Chamber

[Lord Deighton]

I thank my noble friend for raising, as he has done on many occasions before, everyone’s awareness of the fact that when we discuss the deficit we are talking about the annual addition to our stock of borrowing. Until that deficit turns into a surplus we will not reduce our stock of borrowing, and the increased stock of borrowing leaves us with a significant exposure. My noble friend Lord Newby informs me that a 1% increase in interest rates will have an economic effect of approximately £4 billion, but we will review that number.

The way to provide for the contingency to be able to cope with any additional expenditure, whether it is interest, overseas issues or events that crop up, is to continue to drive down our deficit to give us as much flexibility as possible to handle whatever events face us in the future.

[Lord Wigley]

My Lords, can the Minister address the question of fairness with regard to the devolved Administrations? Under the title of fairness, the Green Paper refers to the Barnett formula going on until the end of 2016 at least. Surely, as a committee reported to this House—the noble Lord, Lord Barnett, himself has been involved in this—whatever the situation is with regard to Scotland and Northern Ireland, the Barnett formula is patently unfair to Wales and is underfunding the Welsh Assembly for essential services. When are the Government going to get to grips with this?

[Lord Deighton]

We do not have any proposals to adjust the Barnett formula in this Parliament. As I understand it, the Welsh resource budget will be approximately £13.6 billion, and we will publish our response shortly to the Silk commission on the further devolution of taxation and borrowing.

Northern Ireland: Corporation Tax

Lord Wigley Excerpts

Monday 18th March 2013 Lords Chamber

[Lord Newby]

My Lords, I think that account has been taken of views expressed from many quarters. However, the complication, as the noble Lord will be aware, is that if the Northern Ireland Assembly were to cut the rate of corporation tax significantly, its own budget would have to be cut by an equivalent amount.

[Lord Wigley]

My Lords, will the noble Lord confirm that the Government have taken on board the recommendations of the Silk commission, which, in the context of corporation tax, recommended for Wales that, if Northern Ireland were to have corporation tax powers, so should the National Assembly for Wales? Given that the Government have welcomed the Silk commission’s first report, will he confirm that that will now happen?

Regional Development

Lord Wigley Excerpts

Tuesday 12th March 2013 Lords Chamber

Asked By

[Lord Wigley]

To ask Her Majesty’s Government how they will reduce the geographic disparity in Gross Value Added per head within the United Kingdom.

[Lord Newby]

My Lords, the Government are committed to supporting sustained economic growth across the UK. Economic development is a devolved responsibility in Wales, Scotland and Northern Ireland. In England we are promoting growth across the regions by creating local enterprise partnerships, giving cities the powers they need to drive economic growth via the city deals, and directly investing in and growing enterprises via the regional growth fund, which has now allocated some £2.4 billion.

[Lord Wigley]

My Lords, is the Minister aware of the figures for the inner London west area that show a GVA per head of over £111,000 compared with a figure of £11,000 or £12,000 for Anglesey, the Gwent Valleys, the Wirral and Durham? Is this not a gross disparity and should the Government not give much greater priority to overcoming this?

[Lord Newby]

My Lords, it is a very great disparity—and a disparity, as the noble Lord knows, of very long standing. The good news in terms of Wales is that in 2010 and 2011 GVA grew faster per head than in either England or Scotland, so there is a bit of progress. However, changing and reversing those regional disparities is going to be a long job and it will take a large number of measures to achieve it.

Welfare Benefits Up-rating Bill

Lord Wigley Excerpts

Monday 11th February 2013 Lords Chamber

[Lord Wigley]

My Lords, I am delighted to follow a number of long-standing colleagues with whom I have campaigned on these issues over many years. I, too, voice my concern about this Bill, which will result in real-terms cuts in support for thousands of low-income people, including, despite government claims to the contrary, up to 1 million disabled people, particularly those endeavouring to work.

If the Bill goes through unchecked, the increase in welfare benefits will be 1% while CPI inflation stands at 2.7% and RPI inflation at 3%. As the noble Lord, Lord Kirkwood, mentioned, inflation may well increase substantially. This will lead to real-terms cuts during the next three years in payments to support those who are working and contributing to the economy. They are the very “hard-working families” so beloved of the spin doctors of those who want to underpin the concept of the deserving poor—deserving, apparently, of just 1% uprating. I cannot see how this will contribute to promoting a work ethic or allow working people to participate in a savings culture.

I shall refer to figures relating mainly to Wales, although I realise that the arguments will apply to many other areas, too. The effect of the measures in Wales will be disproportionally greater, since incomes per head in Wales are substantially lower than average incomes in England. Figures released before Christmas show that GVA per head in Wales stands at 75.2% of the UK average, so cuts to in-work benefits for the low-paid will hit Wales proportionately harder.

According to the most recent DWP data, as at 1 December last year, more than 125,000 families in Wales were receiving working tax credits. This comprises some 93,000 families receiving both working tax credits and child tax credits, and 32,000 families receiving just working tax credits. The 2011 census records that in my home area, the Gwynedd local authority area, 9,200 families were receiving one or more elements of tax credits out of the total 52,000 households. This means that 17.5% of all households were in receipt of tax credits. These people generally spend their money within their own local areas. The Welsh economy is made up overwhelmingly of small businesses. These working tax credit reductions will mean that demand is further sucked out of local economies as people have, in real terms, less money to spend.

The uprating will also hit those seeking work. The Government may intend this real cut as furthering workforce discipline, surmising that, as benefits will be even lower, so people will be prepared to take any job. In this, they are fundamentally mistaken. Many unemployed people, particularly in Wales, are seeking work in vain because the economic policies of the Government are failing. There are some parts of the west Wales and the valleys area whose GVA per head is only 65% of the UK average, with 21 unemployed people chasing every vacant job. Putting the morality of this on one side for a moment, starving people back into work has no prospects of success if the jobs are just not there.

If we are to combat this, boosting skills alone will not cut it; we must also tackle the demand side of the economy. We have to make sure that there is real work out there for people to do. The Government's Work Programme, allegedly designed to take people off benefits and into work, was utterly ineffective throughout the UK, but Wales recorded the worst figures, with the Department for Work and Pensions saying that only 1,380 of the 42,380 people on the programme entered long-term employment—a success rate of only 3%. In Wales, 77,377 people are looking for work and claiming jobseeker’s allowance, while just 20,310 vacancies are posted in jobcentres. This means that, across Wales, there are on average four people chasing every empty job

We are facing a vast increase in the number of the working poor—people who are now resorting to the food banks to feed their families. If this Government were serious about ensuring that work pays, they should legislate to ensure that work really does pay more in wages so that people do not have to resort to benefits to make ends meet. Legislating to uprate the minimum wage to the recommended living wage would be a good start, and I commend the points made by the noble Lord, Lord Bates, earlier in this debate.

It has been estimated that the private sector in the UK is sitting on a cash stockpile of as much as £700 billion, because it does not have the confidence to invest. Getting this prospective investment to create economically productive jobs is the challenge which the Government have so far failed to address successfully.

In Wales, although most economic powers are not devolved, we can take some steps to improve the situation. My own party, Plaid Cymru, recently successfully negotiated with the Welsh Government to secure £40 million of funding towards 10,000 new apprenticeship training places in Wales as part of a budget deal. We are also pressing for a new procurement policy that could create several thousand jobs through sourcing public sector contracts domestically. Such an approach might be beneficial also for the deprived parts of northern England which, like Wales, are suffering from ineffective economic policies.

Wales needs job-creating levers to improve our economy, not handouts and workfare. That is why it is essential that the powers recommended by part 1 of the Silk commission are implemented as soon as possible. Real work and training is what is needed, not temporary workfare schemes to take people off unemployment figures for six months. At the very least, the Government must make sure that increases in benefit rates reflect rises in the cost of living. Otherwise, this proposed cut will deepen inequality, increase poverty and further dampen the economic prospects of poorer areas.

--- Later in debate ---

[Lord Wigley]

I am listening carefully to what the noble Baroness says. Surely she would not uproot families—families with children in schools and with support mechanisms around them in south-east England—and move them to Merthyr Tydfil or Middlesbrough, where they have no links at all.

[Baroness Gardner of Parkes]

I do not know that I agree. I arrived in this country and knew nothing about it. I had no job or anything else. Particularly if you have come from another country, it really does not much matter where you settle provided that you have the school that you want. Wales has always had a marvellous reputation for literacy, and I am quite sure that the schools would be good there. You want to be able to live in a safe, clean environment. Again, Wales is a beautiful country. I am a New South Welshman myself.

I do not want to be frivolous in this very serious debate. The one thing that we all have in common in this Chamber tonight is that none of us wants to see restrictions on anything. However, we just have to be realistic and look at the common sense of it. If we do not have the money to afford things, we cannot attempt to do it. It is all very well to think that you can do everything for everyone. I read in the statistics, which I think someone else quoted, that there was a 60% welfare increase under the previous Government between 2003 and 2010. Every household had to pay more than £3,000 a year to meet that extra increase of 60%, and the fact that we went too far and spent too much then is of course catching up with us now. It would be lovely if these things did not happen. However, this has happened and we have to try to put a stop on it, at least to be sure that we do not go on for ever.

The noble Lord, Lord McKenzie, spoke early on about how we denigrate people as being workshy. Again, when I was in dental practice we had only a very poor catchment area near us because the only way people could get to work was by bus. There was absolute overemployment in the country, but we would go to the jobcentre and get nice young people to come and start work. We made the mistake originally of giving them keys to the surgery. That was a big mistake because most of them did not last a week. Then you would phone and say, “Where is Joanie? We were expecting her at work”, and someone would say, “Oh no, she never gets out of bed before midday. We can’t do anything with her”. So this is not a new problem. There have always been people who did not want to work, but there are others who do. That is the tragedy today; plenty of people desperately want to work but cannot find the work, as the noble Lord, Lord Wigley, suggested about Wales. It really is a major problem.

However, the more difficult the world and the more difficult these situations, the more we have to address them. We cannot go on believing that it will all work out all right in the end, just keep your fingers crossed. I was very impressed with the speech by the noble Lord, Lord German. I have never heard him speak before, but he clearly understands all the technical terminology, which I cannot claim to understand at all. The noble Lord said that at the moment all these taxes hit the richest hardest. That is true, because they are paying the biggest bit. Someone else, who I think was on the other side—no, it was that marvellous noble Lord in the back row here. I cannot pronounce his name; it is a bit too difficult for me—

Bank of England

Lord Wigley Excerpts

Tuesday 22nd January 2013 Lords Chamber

[Lord Newby]

My Lords, the Government will listen to Mr Carney’s suggestions. Mr Carney has said that he will not comment on the position in the UK until he arrives. His key speech on this issue was made in February last year before he was appointed. In that speech, he said among other things that,

“if nominal GDP targeting is not fully understood or credible, it can, in fact, be destabilizing”.

There is no quick and easy answer—

[Lord Wigley]

My Lords—

[Noble Lords]

Order!

Autumn Statement

Lord Wigley Excerpts

Wednesday 5th December 2012 Lords Chamber

[Lord Sassoon]

Again, I am grateful to my noble friend for her kind words. It is also important that the House recognises that the damage done by the fall in GDP as a consequence of the structural position and the mess left behind by the previous Government, combined with the financial crisis, continues to be assessed as worse and worse. As my noble friend said, it is now estimated to be a fall in GDP of an extraordinary 6.3%.

I also agree with my noble friend that it is important that the banks are realistic about the state of their balance sheets. Linking back to the debate on the Financial Services Bill that we had earlier this afternoon, it is important that the new Financial Policy Committee—up and running now for a period in shadow form—is beginning to get to grips with these issues. These sorts of things were never debated and put on the table by the authorities in the past, when the punchbowl should have been taken away. So my noble friend is completely right.

[Lord Wigley]

My Lords, I also wish the Minister well for the future and add my concern to that expressed already about whether this mini-Budget will trigger the necessary growth. Specifically, with regard to the commitment in the Autumn Statement of £5.5 billion in additional infrastructure investment and the consequential £227 million additional capital funding available to the Welsh Government, will he confirm that that spending can be allocated as desired by the Welsh Government and does not need to follow the pattern of the £5.5 billion that has generated it? Will he also confirm that in the discussions that have taken place between the Treasury and the Welsh Government over recent weeks with regard to the enhanced capital allowance in enterprise zones, that is not assumed to be coming out of that money?

[Lord Sassoon]

I believe that I can confirm both points. The allocation will be for the Welsh Administration in the normal way. I believe that the noble Lord’s understanding on the second point is correct. If it is not, I will correct that understanding.

EU: UK Net Contributions

Lord Wigley Excerpts

Wednesday 24th October 2012 Lords Chamber

[Lord Sassoon]

My Lords, the UK benefits from its membership of the EU. The UK should make a proper contribution to the net EU budget, but we have to see that the completely unacceptable proposals from the European Commission for the next multi-year period are reined back. The Commission’s proposals, as opposed to a real freeze, would mean an increased UK contribution of £10 billion, or £1.4 billion a year. That is indeed many nurses, policemen and other front-line public servants.

[Lord Wigley]

My Lords, the Minister said that the UK benefited from membership of the EU, and I think that many people will be glad to hear him say that. However, will he confirm that it is not just the rich regions of Europe that benefit from the structural funds? In fact, Wales, with the lowest GVA per head of any country or region in the UK, gets considerable benefit. If there were to be changes in this direction, can he give a guarantee that those sums will still come to Wales?

[Lord Sassoon]

My Lords, I certainly accept that money should be targeted at the regions where it is most needed. I merely say that recycling money into the wealthiest regions seems like wasteful activity.

Finance: Loan Guarantee Scheme

Lord Wigley Excerpts

Tuesday 24th July 2012 Lords Chamber

[Lord Sassoon]

My Lords, I am very happy to correct the noble Lord, Lord Barnett. Some £40 billion of projects in the national infrastructure plan that are due to start construction before 2015 could well be eligible for guarantees under the scheme. We are inviting applications for guarantees now and, subject to legislation, we hope to have the first guarantees granted this autumn, so this is absolutely not something that waits till 2014. It is because of the strength of the national balance sheet and the fiscal retrenchment that we are able to come forward with a £40 billion scheme that starts this autumn.

[Lord Wigley]

My Lords, will the Minister confirm that this scheme will extend to Wales, Scotland and Northern Ireland? That being so, will he confirm that there were discussions with the three Administrations before the announcement was made?

[Lord Sassoon]

I can confirm that the scheme will extend to the devolved Administrations.