Wales Bill

Lord Rowe-Beddoe Excerpts

Tuesday 22nd July 2014 Lords Chamber

[Lord Rowe-Beddoe (CB)]

My Lords, I broadly welcome the Bill as a major step in the slow yet maturing process of devolution. The words of the noble and learned Lord, Lord Morris of Aberavon, are most wise in his assessment of the whole process, particularly on reserved powers. A number of noble Lords have referred to that feeling this afternoon.

However, when it comes to the elephant, as it has been described, I think that there is actually an entire zoo in the Chamber. The elephant in this room is of course the Scottish referendum. Whatever the outcome of that referendum, life will certainly never be the same in the United Kingdom. I am of the firm opinion that there will be major constitutional change over the next few years. A noble Lord, whose name I did not get, said, “What about England?”. Indeed. That is a whole new issue, which I am sure will be addressed at another time. I certainly do not wish to rehearse any further argument in that regard, but it is somewhat overhanging and must overshadow our attitude towards the Bill over the next few months.

I declare an interest as chairman of Cardiff Airport, which was acquired by the Welsh Government in March 2013. In that context, we are particularly concerned about the asymmetric impact of airline passenger duty on both domestic and international connectivity. I fully endorse the Silk recommendation in that regard and fully support the case for this fiscal power to be devolved. I intend to return to this subject in greater detail in Committee.

The noble and learned Lord, Lord Morris, is no longer in his place, but he tested my memory of 14 years ago, which I think will fail, in so far as if I were to dig into the back of my mind and take account of inflation, I do not think that the Welsh Development Agency’s powers were much less than what is proposed today, if at all. I will be a little more precise in Committee.

However, and it is a big “however”, the increased powers envisaged in the Bill, the other powers discussed in the Chamber today and, indeed, each step of devolution of power place greater responsibility on the Welsh Government. These steps must therefore be accompanied by greater accountability, scrutiny and transparency. These essentials cannot be undertaken with the rigour demanded by the present 42 Assembly Members who are not in the Government.

Already the strain imposed is creaking. Dame Rosemary Butler, the Presiding Officer of the Welsh Assembly, said less than a year ago:

“There are only 42 Members to scrutinise £15 billion of taxpayers’ money, and to scrutinise the government on the big issues of the day—the future of our health service, our education system and the economy. On top of that they have to make sound, thoroughly scrutinized laws for our nation. A quarter of those 42 members sit on three committees, half sit on two. One would simply not find the same level of workload on Members in Westminster, Holyrood or Stormont”.

I therefore conclude that the logic is correct and Wales will need more Assembly Members in order to perform scrutiny effectively and to be seen to be effective, and to provide the necessary assurance to the people of Wales. I realise that my firm support for increasing the number of Assembly Members in my homeland will not necessarily lead to unparalleled joy by certain of our fellow countrymen. However, let us please remember: more responsibility, more accountability and more scrutiny. How the additional Members are elected is clearly an issue for the future.

I turn to a point made by the shadow Welsh Secretary in the other place, in his Third Reading speech:

“We still do not know whether the block grant will be eroded over time. Initially, it will be protected, but the Exchequer Secretary told us again here today that if Welsh gross domestic product and revenues grew more slowly than those of England, Wales would have less money over time to spend on vital public services”.—[Official Report, Commons, 24/6/14; col. 281.]

Chapter 16 of the report of the Silk commission states that,

“transfers of powers should be accompanied by (and be conditional on) transfers of funding being fully agreed between the two Governments in each case, and by agreed changes to the Barnett formula comparability factors”.

Comparability is neither the issue nor the answer.

I return for a moment to your Lordships’ Select Committee on the Barnett Formula, chaired by the noble Lord, Lord Richard, who is unfortunately no longer in his place, on which I had the privilege to serve in 2008. Our findings were published more than five years ago. The attitude of successive Governments—and I look to both sides of the House, including the elephant in the middle—has been to shirk their responsibility. There has not been a single serious debate. Wales has been grossly underfunded over the last 10 years, if not more. Until that is confronted by a Government with the guts, if I may use that unpleasant word, to face it in this Chamber and do something about it, that will obtain. It is ridiculous. We know why Wales is underfunded, of course. I shall not mention the unmentionable. It is because a large part of the United Kingdom has been grossly overfunded for the same period of time.

This formula has been in existence for the past 35 years. There has been no real engagement by political parties in this Chamber or in the other place with discussing the detailed analysis that your Lordships’ Select Committee undertook or the recommendations that we provided. It is deplorable. There has been no review or revision of this formula for 35 years because it is political dynamite. That is the answer—or is it because of political cowardice?

Wales is, and has been, underfunded. The all-party committee of your Lordships’ House unanimously determined that central funding should be based on an explicit assessment of relative needs. Administrations with great need therefore receive more money; Administrations with lesser need will obviously receive less. Your Lordships’ committee recommended, for example, that an expert body be formed—perhaps called the UK funding commission—to determine relative needs by using a small number of need indicators, which the committee identified. That is not unusual; it is in fact similar in principle to the Commonwealth Grants Commission of Australia, which performs this function of the distribution of central federal funding annually.

The formula is inequitable. We can talk around it, we can talk about this and we can devolve this, but there is a central grant and it is inequitable as far as Wales is concerned. It should and must be changed. Where are we? I am still waiting for a political party to grasp the nettle, as are, I am sure, many other noble Lords.

I conclude by quoting our chairman, the noble Lord, Lord Richard, and the noble Lord, Lord Barnett, after whom the formula was named, much, I think, to his embarrassment, as he would say if he were in his place today. The last five lines of his oral evidence to the committee are very moving and I would like to share them with you. Our chairman, the noble Lord, Lord Richard, said:

“You devised a mechanism which you hoped would last for a few years. You did not expect it to last for as long as it has lasted. You are not sure now whether it is based on the right criteria and you lean towards having, among other things, a needs based assessment. Is that fair?”.

The noble Lord, Lord Barnett, said: “That is fair”. I think that we need to address that, sooner rather than later.

--- Later in debate ---

[Baroness Randerson]

I think that the noble Lord raises a fundamental point about devolution. The control of building and road infrastructure in Wales is devolved. With it comes the Barnett consequential of the funding for infrastructure throughout the UK, which is reflected in the proportion of the Department for Transport’s budget that is devolved to the Welsh Government.

To complete the point I was making, we have agreed an annual limit of £125 million relating to borrowing in Wales. That limit was proposed by the Welsh Government. A lot of noble Lords referred to the Barnett formula. I remind them that the Holtham report recommended that Welsh funding should be between 15% and 17% above English funding. Funding in Wales is 15% above the funding for England at this time, so it is within the areas deemed as fair by the Holtham commission. That is not to say that it has been fair in the past; it is at the current point because there has been divergence in recent times rather than convergence. I remind noble Lords that in 2012 the Welsh Finance Minister Jane Hutt agreed with the Chief Secretary to the Treasury in an exchange of letters a system to review the situation in relation to Barnett if convergence was about to begin again. That system worked satisfactorily at the spending review last year and it provides a basis for fairness in the future. I am absolutely sure that noble Lords will return to this in the future and that we will be talking about it in some detail.

[Lord Rowe-Beddoe]

Is the Minister saying that the Barnett formula has been revised in the last 12 months?

[Baroness Randerson]

No I am not, but the natural process of the way in which the formula works means that in times of spending restraint, where we have been for the last four years, the convergence process, which worked over many years and made the formula more, shall I say, sparing in relation to Wales, ceased to operate and we have had divergence which has brought Wales to a position of greater fairness now than in the past. That means, however, that if we go back to times of financial plenty, there would be an issue once again. That has been recognised in the exchange of correspondence between the Chief Secretary to the Treasury and the Finance Minister in Wales.

In response to the general point made by noble Lords from the Labour Party about dual candidacy, as I predicted, when we read Hansard tomorrow it will appear as the most important matter in the Bill to members of the Labour Party. It is significant to remember that the purpose of doing this is to widen the pool of good candidates. Time and again people have raised the issue of how important it is to have scrutiny of the highest nature in the Welsh Assembly. It is not only a case of ensuring that there are more Assembly Members—whether you agree with that or not—but of ensuring that the best candidates can stand and get elected.

Many noble Lords on the Benches opposite referred to the Clwyd West situation. I refer to the Nick Bourne situation, if my noble friend will forgive me, where, as the leader of a party in the 2011 Assembly elections, he failed to gain a seat because his party had done so well. That is an anomaly, and it is important to bear in mind that within this system you will get that kind of anomaly. I say to the noble Lord, Lord Rowlands, who raised the issue of people who lose still getting into the Assembly, that that applies only if you think that elections should be on a winner takes all strategy. However, if you believe that elections are a way of ensuring that different strands of opinion are represented in our legislatures and Parliaments, you look at ways of ensuring that significant minority opinions are represented as well as majority opinions.