MONDAY 27 MAY 2002

MS EDWINA HART AM, MR DAVID RICHARDS AND MR STEVEN PHILLIPS

  880. Minister, you referred to the proportion of the income you have being 50 per cent from Barnett, can you outline for us where the rest of your funding actually comes from? The second part of the question is, are you expecting Barnett-plus this year?
  (Ms Hart) If I can clarify that, I was referring to the amount of Government expenditure in Wales, and 50 per cent comes from us within the Assembly. Obviously money comes into Wales from other sources from Central Government. I actually deal with that block. I very much hope I will have a Barnett-plus arrangement this year, particularly in respect of the structural funds programme. The Secretary of State is well aware of our views and so of course are Treasury Ministers.

  881. Just taking the Government funding, the straight 50 per cent, how do you allocate that? What is your process for determining how that will be spent?
  (Ms Hart) I actually have a very transparent budget process within the National Assembly which commenced last week. I write out to all the committees of the National Assembly as well as the Ministers asking for them to indicate their priority areas, and then Ministers look at their priority areas. I will then put before them a preliminary budget which I will put before them in early October of this year and they will then go back again to committee to discuss how I have shown those priorities, and then there will be a final budget discussion and the budget will be ratified in November. What I have always said to committees is that if they have priorities which are emerging, they should flag them up in this process, and, importantly, Ministers do have to flag up for the entire year where their priorities are in terms of expenditure. Obviously the budget process this year will be governed by the partnership agreement with the Liberal Democrats where we have shown where our commitments are in terms of the priorities of the administration, and that is a published document and I will take that forward. In terms of the National Assembly, your Lordships might be interested in seeing the papers which are produced for this, where you can see every budget line within every budget and every allocation and where it actually goes.

  882. How do you explain the spending to the electorate?
  (Ms Hart) That is quite difficult sometimes. They can see the headline figures in terms of things like health expenditure, but sometimes lower down they cannot really see where the money is going. I think we have to do a lot more work in this area. We obviously publish documents on the internet and publish documents for people to see, but at the end of the day people are not interested in the budget process, they are interested in the outcome and the impact that has on the health service waiting lists and on special education needs and so on. Of course in Wales we have taken the decision, which I think your Lordships will also be interested in, that equality of opportunity is an issue which we mainstream through the budget process. So people have to approve what they do in our mainstream equality agenda with the money they undertake. In Wales, of course, a large amount of money goes directly through the Revenue Support Grant to local authorities and that is not in the main hypothecated.

  883. You heard me asking the previous witnesses about remote areas. Can I ask you how much you are able to take into account the fact that citizens who live in remote areas either need more money spent on them to deliver the same level of government activity or, the other way round, they can have the same amount as everybody else but have fewer government services? Given that devolution is certainly aimed at bringing government to remoter areas, at least I believe it to be, how do you think you are able to do that?
  (Ms Hart) We have had devolution to Wales but I also see devolution to local government as being very important in terms of how we deal with the services across Wales, especially to remoter communities. If we take the example of transport, where the issues of transport in rural areas are very difficult issues, we have then a question of prioritisation of what we give in terms of grants, subsidies, what we do on community transport grants, to ensure they have their fair share of resources. So because we take the budget apart like that, we can see the impact of our policies particularly in rural areas and, of course, in very deprived urban areas as well where some of these issues are also raised when they feel they do not have particular services. We can deal with it through the budget process in that way. I am currently analysing what type of money is going to local authorities across the board, not just the Revenue Support Grant, but in other programmes, so I can start to assess the level of spend now across rural and urban areas which will enable me to have detailed information in relation to your question. But I do think it is important that at the heart of every policy area is equity across Wales. So my starting point as the minister responsible for budgets is, does it deliver equity and equality of opportunity across the board when the policy is implemented.

  884. Following on from that, how easy do you find it to justify spending more money on the remoter areas to the urban majority?
  (Ms Hart) I have not found it particularly difficult. If you explain the policy well and people understand why you are making that policy decision, it is not a question of justifying it, it is a question of understanding. There will always be people who think their priority is greater than others, I suppose the art of government is to get the balance correct. Obviously on the matter of foot and mouth—and I understand you are taking evidence from my colleague tomorrow—there have been stresses and strains between the urban and the rural communities, and people have said, "Look at them having this additional money", but when the needs of the rural economy are explained to them, people do fully understand what the issues are. But it is a question of politicians having good communication skills and recognising you do not just govern on behalf of the white southern urban heartlands but on behalf of all the people in Wales and there must be equity and transparency in all our dealings with people.

  885. Two questions if I may, Minister. We were in Edinburgh, as you will know, a week or two back and the Scottish Minister of Finance was quite relaxed about the fact he did not spend all his money when the resources came in, and he thought this was just part of the process. Is there an issue in Wales about under-spending?
  (Ms Hart) I am delighted to say there is not an issue in Wales on under-spending. I set myself a target, because I was very unhappy about the under-spend figures, which I think we are going to achieve, namely the under-spend will be in the region of 1 per cent which is perfectly manageable. I think it is a superb example actually to the Westminster Government and the Whitehall departments of what you can do when you manage your resources correctly.

  886. I will note that for Edinburgh too. On a rather more general matter about the way in which the money reaches you, and it reaches you, as you say, through the Barnett Formula and through other sources, there it is, you have to accept it, but problems must arise. I imagine over the famous Objective 1 issue there must have been difficulty in meeting the Welsh point of view. I am thinking about it constitutionally and if there are such difficulties about the Welsh allocations decided, I think, in Westminster or in the British Government. Do you feel the Assembly generally or you personally have enough scope for putting your point of view?
  (Ms Hart) Yes, I do have plenty of opportunity. Obviously I can meet Treasury Ministers if I wish, I have regular discussions with the Secretary of State for Wales, and I will take these issues forward. That is why, when people ask the question, "Is there a role for the Secretary of State", there quite clearly is because he has a negotiating position in terms of the budget requirements, and I think he very much has his finger on the pulse in terms of the priorities of the National Assembly. He is aware of every discussion we have and whether there are issues to do with money. There are some issues I think which are problematic and this is when policy decisions are taken in Westminster which affect England and Wales, and sometimes people do not necessarily realise the impact of that policy decision on the Welsh block, but I think those are probably teething troubles which we very much hope we can deal with during the course of the next 12 months. Inevitably, devolution is very new, we are three years old, as it were, and inevitably problems occur but in the main we are beginning to sort these problems out with goodwill on both sides, as the First Minister indicated.

  887. When we talked to Mr Murphy, he was very clear and precise on the fact he was not simply representing the views of the Assembly, he was taking note of the views of the Assembly and that of key ministers such as yourself, but he was presenting his own views to the Cabinet. Are you content with that rather indirect representation?
  (Ms Hart) I am content with the devolution settlement as it stands at present. Obviously I, like the First Minister, have views on the future.

  888. What are they?
  (Ms Hart) I agree with the First Minister, at the end of the day I would have liked primary powers in terms of legislation, and I very much hope Lord Richard's Commission will show a way forward on which we can have a consensus.

  889. Would that affect the position of the Secretary of State?
  (Ms Hart) I am not going to pre-empt the outcome, like the First Minister.

  Lord Morgan: Thank you. That is a very interesting answer.

  890. In answer to Lady Gould you said you very much hoped for a Barnett-plus amount. How would that come about? What amount are we talking about? Does it come about because you talk to the Secretary of State for Wales and the Secretary of State for Wales talks to the Treasury and the Treasury hums and haas and says, "You can have a fiver". How does it work?
  (Ms Hart) I have never found the Treasury to be one to hum and haa!

  891. All right, it does not hum and haa but says, "You can have a fiver".
  (Ms Hart) Obviously we do have excellent relationships between officials and the Treasury and these are on-going discussions which occur all year on all aspects of government financial policy. I think the last time we had as Barnett-plus £421 million because we had the public expenditure cover which we required, and we very much hope they will come to a similar view to that looking at the figures this year. What I think it is fair to say about the Treasury is that you do always know where you stand with the Treasury in terms of whether there is availability of cash. They are quite hard task-masters but at the same time I think they do recognise the needs of the devolved administrations as well. I think you have seen that quite clearly in what they have done with the peace dividend in Ireland which nobody would disagree with.

  892. Yes. This is done through you going to the Secretary of State for Wales going to the Treasury, or is it officials? I am not quite clear what the route is.
  (Ms Hart) It is done at a number of levels. It is done between the officials who discuss at official level so the proper advice can go into Treasury Ministers; it is also done via the Secretary of State and of course it can be done on occasions between myself and Treasury Ministers. It is very varied.
  (Mr Phillips) To add to that, it is important to recognise there is actually a framework set down between the Treasury and the devolved administrations called the Statement of Funding policy. That covers many of the areas this discussion has focused on. We use that at least at official level as the basis for our dialogue with the Treasury, and we are particularly active at the moment on that because of the current spending review and the Chancellor's announcements which we expect in July. That supplements the direct and indirect contacts which the Minister has referred to.

  893. As a supplementary to Lord Morgan, and forgive the ignorance of this question, has there ever been a debate in the Assembly about primary powers?
  (Ms Hart) I would have to rack my brains on that. I am certain there have been elements of discussion, certainly based on Barnett, ad nauseam, within the Assembly. I would have to check whether we have had a proper full-scale debate on primary powers and get back to you.[21]

  Lord Acton: Do not worry. That is all right.

  894. From your point of view in negotiating, information is power, do you feel the sources of information are adequate from your point of view? I am thinking now in terms of the UK level, the type of data which might be helpful to you?
  (Ms Hart) Yes. I think we do have sufficient information, we have a good basis for information in our dealings on these matters, yes.

  895. Generally, are there other ways you can raise resources, the Welsh end of the Government, to increase overall resources? Have you pursued those?
  (Ms Hart) No, no. There is a lot of talk about whether we want some tax-raising powers, which is an issue which you have touched on before, but that is not open to us. Of course, there is no way we can borrow money in the sense they are now allowed to do in the North of Ireland, and we have not pursued any of those courses yet.

  896. Would the Welsh Assembly feel it would be appropriate to have a tax-varying power?
  (Ms Hart) I am not, like the First Minister, very keen on being able to have a tax-varying power.

  897. So generally your personal view, along with the First Minister, would be to emulate Scotland in terms of legislative powers but not in terms of tax-varying powers?
  (Ms Hart) Yes, very much so. It would be interesting to see when they exercise the tax-raising powers in Scotland how that pans out.

  898. Is the statement of funding level, this process of negotiation with the Treasury, a statutory-based organisation, or is it part of the Concordat area?
  (Ms Hart) It is part of the devolution settlement.

  899. So it is embodied in the Act?
  (Ms Hart) It is more than that.
  (Mr Phillips) It is more of a Concordat-type arrangement. It flows from the provisions of the various—
  (Ms Hart) It has not got statutory enforcement but it was agreed at the time of the devolution settlement; the statement of funding policy.