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Funding and Finance for Wales

Volume 503: debated on Wednesday 6 January 2010

5. What recent discussions he has had with the Chancellor of the Exchequer on the operation of the Barnett formula in Wales. (308874)

8. What assessment he has made of the recommendations of the Holtham commission on funding and finance for Wales; and when the Government plan to implement the recommendations that they accept. (308877)

The Holtham report made it clear that, although funding is currently at a fair level, spending allotted to Wales could decline in relation to that of England. That is why I have fought hard for an historic new commitment from the Treasury on funding, to prevent the people of Wales from being disadvantaged in the future.

I fully recognise the autonomy of the Welsh Assembly Government in determining specific spending priorities. What can the Secretary of State tell me, following his discussions with Welsh Assembly Ministers, that will reassure my constituents about the overall level of funding available for public services in Wales?

I remind my hon. Friend, the House and the people of Wales that the Welsh budget has more than doubled under Labour, going up from about £7 billion to nearly £16 billion next year. Again, that is a fantastic record compared with the Tory years. Spending on health services in Wales has more than doubled, for example, and there are now more nurses, more doctors and more health workers. That is a record of Labour’s success that should reassure my hon. Friend, but we must protect Wales’s budget in the future.

Now that there is irrefutable evidence of the unfairness of the Barnett formula, the time is surely right for a new formula to be devised on the basis of need. The Secretary of State said that he had an understanding with the Treasury, but Ministers have always been able to argue for more money for their Departments. What we really need is a fair structure. Can we not work together to achieve that?

I congratulate the hon. Gentleman on his modesty. Before Christmas, he told a media outlet that his favourite literary character is Superman. “Is it a bird? Is it a plane? No, it’s the hon. Member for Meirionnydd Nant Conwy!”

I agree with the hon. Gentleman and I am happy to work with him, because the issue is one for Wales as a whole. To his and his colleagues’ credit, they have asked questions about the Barnett formula. The formula has worked fairly up to now, as the Holtham commission said, but we need to ensure that it works fairly in future. That is why the formula and the agreement I got with the Treasury for assessing the allocation to Wales under the comprehensive spending review have to be refined to protect Wales’s future.

Does my right hon. Friend accept that as well as moving to the fairest possible system for the allocation of finances, we must understand that the problem with formulae is always unpredictable year-on-year fluctuations? We have seen that in local government, police, health service and other formulae. Will he ensure that any new system makes sure that there is predictable income year on year, whatever the elements on which it is based?

As always, my right hon. Friend makes a very telling point. This goes to the heart of the issue, which is that the Holtham report showed that although Wales had been treated more or less fairly, under seriously large increases in public spending we could see a convergence between Wales and the English average, which would disadvantage Wales against those areas of England that are most comparable with it, particularly the north-east. That is why we needed a new approach that underpinned the Barnett formula with an assessment that ensures every time that Wales is not disadvantaged—it puts a floor, as it were, under convergence—which is what I have achieved.