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.