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Lord Dixon-Smith: Perhaps I may speak first to Amendment No. 207A in the name of the noble Lord, Lord Elis-Thomas. I have in this grouping Amendments Nos. 208 and 209 which apply to Clause 83. As the Bill is drafted, they must inevitably appear after we have the debate as to whether Clause 82 shall stand part of the Bill, which I oppose. Therefore, it may be for the convenience of the Committee if I address that particular issue also.

I am not competent to answer the question of whether or not it is proper to use the Barnett formula as the exclusive denominator in this instance, but I suspect that it is not. It is a remarkably simple and durable formula and like many simple and durable things, it has stood the test of time. Therefore, it is right that we still have it and the amendment in the name of the noble Lord, Lord Elis-Thomas, is drafted sufficiently openly not to impose any unreasonable restrictions.

A large part of the funding to the national assembly of Wales will consist of local government funding. For years, that has been calculated on--dare I say it?--a more sophisticated and complex formula than the noble Lord, Lord Barnett, had the wisdom to provide. When I was dealing with it intimately, I always said that if you programmed that formula to produce lamb chops, it would come out with lettuces. It was a wonderful mechanism for causing dissatisfaction in local government. It was adjusted every year to take account of demographic change and the effects of that obviously delighted some people and vexed others. The result was a considerable lack of both transparency and clarity which ordinary members could not understand and those

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of us who were deep in the workings of the system learned to live with it and perhaps had a glimmering of light in respect of it on some occasions.

Perhaps I may now move on to the issue of whether Clause 82 should stand part of the Bill. I am opposing the inclusion of Clause 82 for the very good reason that, in my view, it is almost the very ultimate in obscure legislative drafting. The question I ask myself is whether we are dealing with the intention of the Bill here or whether we are dealing with the words that are actually written; in other words, which is superior in this particular instance? Whenever I am dealing with a contract outside of this place--and I take legislation as being in the form of a contract--my lawyers always advise me very clearly that it is the wording of the contract that matters and that, if we make a mistake in the wording, the consequences could be rather difficult.

As has already been pointed out, Clause 82 says:

    "The Secretary of State shall from time to time make payments to the Assembly out of money provided by Parliament of such amounts as he may determine".

I accept that the Secretary of State is answerable to Parliament and that, therefore, he must appear before it to explain and justify himself. But it seems to me that that drafting is just a little too whimsical to be satisfactory. Therefore, I have attempted--although I may not have done so adequately--to remove that element of "whimsy" from the Bill by opposing the Question that Clause 82 should stand part and by seeking to amend Clause 83 by way of Amendment No. 208. That would both ensure clarity as regards the funding that will go to Wales and also ensure that the authority of Parliament is stamped on those payments. That is the reason for Amendment No. 208.

Amendment No. 209 deals with a very simple and basic matter which I hope the Government will accept in principle, even if we do not have to put it on the face of the Bill. The amendment would ensure that, when the new assembly comes into being, it knows what funds are available to it from day one. It would require the government statement to be made,

    "before the Assembly takes up its authority".

I believe that to be an essential administrative procedure. What I have proposed is a package, which I do not believe to be unreasonable. I wait with interest to hear the Minister's reply because he may be able to allay my worries.

5 p.m.

Lord Davies of Coity: Perhaps I may comment in relation to Clause 82 and the amendments which have been tabled by the noble Lords, Lord Roberts and Lord Mackay. There are two subsections in question, the first of which says:

    "The Secretary of State shall from time to time make payments to the Assembly out of money provided by Parliament of such amounts as he may determine".

Subsection (2) of the clause is set out in exactly the same vein and refers to a Minister or a "government

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department". Amendments Nos. 205 and 206 seek to insert in that clause the words,

    "recognising the needs of Wales in relation to the United Kingdom as a whole".

In my view that is absolutely superfluous. In fact, if any amendment were to be inserted, it would have been sufficient to say,

    "recognising the needs of Wales".

Indeed, it is totally unnecessary to add the words,

    "in relation to the United Kingdom as a whole",

given what the noble Lord, Lord Roberts, said about the circumstances facing the Welsh people. It would have been sufficient to describe it in the way that I have suggested, without taking into account what was happening in the rest of the UK.

Amendment No. 207 says:

    "The Secretary of State shall receive representations and consult interested parties, including the Assembly".

The assembly will be the bona fide government of Wales. It does not require any legislation to mandate the Secretary of State to receive representations or to consult anyone. Presumably, that will be done as a matter of form. As regards revenue, I should tell noble Lords opposite that the Government will be providing the money for the Welsh assembly and it will not be raised by way of taxation. This Government are a government who want to democratise at local level. This Government want to ensure that the Welsh assembly succeeds. Therefore, it is this Government who will provide the money to enable it to do the job that it has been established to do.

It strikes me that noble Lords opposite seem to be tabling amendments and seeking to insert caveats in the legislation which can only frustrate the activity of the Welsh assembly and perhaps not let it work as successfully as it otherwise would. Then they might be able to say, "Well, we told you so; we didn't want it in the first place".

Lord Crickhowell: I do not believe that any of the three amendments under discussion would do anything to frustrate the work of the assembly. On the contrary, they seek to obtain guidance as to the effect and meaning of Clause 82, and of the related Clause 83, so as to give us a clearer understanding of the financial arrangements for the assembly. I am sorry that the noble Lord, Lord Barnett, had to leave the Chamber for reasons that we fully understand, because I should like to say a few words about the Barnett formula. It is absolutely appropriate that the name of the noble Lord should be so commemorated because of his introduction of the formula in the manner described by the noble Lord, Lord Callaghan, at Second Reading.

However, in that context, I believe that we should perhaps also commemorate the name of Goschen. In my time in the Welsh Office, whenever we discussed Scottish affairs we remembered the earlier formula dating back to the end of the 19th century, which was the basis upon which money had been distributed to the

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Scottish Office for many years. What the noble Lord, Lord Barnett, did was to update Goschen in a sense and thereby bring Wales into the formula.

We were told that one of the intentions of introducing the formula was to eliminate some of the conflicts that previously took place. However, if that was the objective, it was not entirely successful. Certainly, during my time in government, there were frequent and sometimes stormy discussions in Cabinet, and in Cabinet committees, about the application of the formula and whether it needed change and reform. Indeed, I recall one such debate in which the Scottish Secretary took part. In those days I was in a happy position because the Barnett formula, as it applied to Wales, was rather favourable to the Principality. It was the Scots who came under the most attack. The balance was pretty reasonable for Wales in that there were no great grounds for the English wanting to give us less or for our formula to come under attack.

However, that was not the case in Scotland. There were strong moves to say that the problems of the north-east of England had become much more severe relative to those in Scotland than had previously been the case, and that there should be a change in the formula. On the occasion to which I referred there was a vigorous debate. Strong words were advanced on behalf of the north-east and, finally, my right honourable friend the Scottish Secretary, as he then was, had to give some ground and a change was made in the formula. But that change had to be so small that it could not be recognised outside because it would be politically unacceptable.

The Barnett formula has survived largely because, up until now, it has not been thought politically acceptable to change it. But that is not a situation which can continue forever. Indeed, the noble Lord, Lord Barnett, set out the reasons why change will be necessary. The Barnett formula no longer accurately reflects the balance of needs among Scotland, Wales and England or, indeed, among the component parts of England which, in some cases, are perhaps in great need of support.

Change will undoubtedly come. We should not get too carried away by these references to the Barnett formula in the sense that we should not be misled into thinking that all we are concerned with in our consideration of the future financing of the assembly is the application of the Barnett formula. As has already been pointed out, it basically deals with incremental changes. But even on that basis it was always possible for Ministers, faced with a particular need or a particular situation, to make a change. I can think of a number of occasions on which, whatever the Barnett formula stated, I negotiated a specific amount to meet a specific need for Wales. I am sure that my successors did exactly the same.

As my noble friend Lord Dixon-Smith rightly pointed out, a different formula applied--certainly in my time--to local government. In my time Wales did rather well out of the local government formula. There was always a certain tension in English local authorities because Welsh local authorities appeared to be treated so favourably with regard to the rate support grant. I make

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these points because at times even Ministers appear to be guilty of inserting in the Barnett formula characteristics that it does not have. The noble Lord, Lord Williams of Mostyn, seeking to respond to points that I had made on 2nd June about the funding of the university sector in Wales, turned his attention to the Barnett formula. He said that he could not see why the Higher Education Funding Council for Wales,

    "should be treated any differently vis-a-vis assembly decisions, decisions with respect to the Welsh Development Agency, funding for local government or, for instance, plans for improving the trunk road network".--[Official Report, 2/6/98; col. 226.]

In fact local government funding was not--and I do not believe is--covered entirely by the Barnett formula. On that occasion because of the grouping of amendments I was not able to respond to some of the points that were made during the brief discussion we had on the funding of the university. However, I return to the issue again because it illustrates well the point I wish to make.

During that debate I expressed concerns about the funding for the university institutions in Wales. I pointed out that it appeared that the funding would come out of the block grant on the basis of the Barnett formula, which is substantially related to population. I expressed concern because the university institutions in Wales have a large number of students who do not come from Wales. Their requirements have to be set in the context of the United Kingdom as a whole. On that occasion the noble Lord, Lord Callaghan, did not side with me because he felt that I sought to do away with the arm's length principle and he feared interference. That was far from my thoughts. I am as robust a defender of the arm's length principle in this connection as he is. However, I fear that the Minister did not reply to the point that I had made. He stated, again at col. 226 of the Official Report of 2nd June, in relation to the Higher Education Funding Council for Wales,

    "The functions of that council will remain the same. All that the assembly can do is what is presently capable of being done by the Secretary of State for Wales. It is possible, of course, that the assembly might wish to give increased funding to HEFCW within its budgetary constraints".

My fear is not that it might wish to give more, but that it might be forced to give less because the funding formula that establishes the block grant does not adequately provide separately for university funding. It is possible for the Secretary of State for Wales, or for any other Minister, to make special arrangements each year and to negotiate them with the Treasury and with colleagues to meet the specific needs of any institution, whether it be a university institution or any other institution in Wales.

I hesitate to write formulae into Bills which establish exactly how money should be allocated for the obvious reason that has already been enunciated; namely, that the formulae become outdated. However, I have much sympathy with the amendment of the noble Lord, Lord Elis-Thomas, which at least does not fix the formula on the basis of the existing Barnett arrangements but envisages a future change. It seems to me that we do not know exactly what the Government's intentions are. We are told by the noble Lord opposite that the present Government's intentions towards the assembly are entirely warm-hearted. But that is hardly

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the basis on which to prepare legislation to last for many decades. We do not really know how this process will work. The paragraph entitled, Financial effects of the Bill, states,

    "The Bill requires the Secretary of State to make payments to the Assembly out of money provided by Parliament. The Assembly will thus become responsible for most of the £7 billion annual budget which is currently controlled by the Secretary of State for Wales. This budget will be updated in future using the existing (population-based) "Barnett" formula, so that its amount will change in line with changes in comparable English spending programmes.

    The Assembly may also receive payments from Ministers and government departments".

That leaves a good deal of uncertainty as to exactly what money will be allocated under what arrangements. We owe a debt of gratitude to those who tabled these amendments in that they will enable Ministers to give us some greater understanding of what they have in mind.

It seems to me that what is important in the Bill as it is drafted is the relationship between Clause 82 and Clause 83. Clause 83 tells us that the Secretary of State has to prepare a statement which shows how the money is to be distributed and made up. It tells us, incidentally, that the statement is to be laid before the assembly. That prompts me to ask, "What about Parliament?" I recall that whenever I allocated funding for institutions in Wales--certainly for local government in Wales--I had to make a statement in the House of Commons and I was vigorously cross-examined. I am not clear whether it is the intention that when this statement about an important matter is made in future it should be made in both Houses so that questions can be asked in Parliament about it. It seems to me an issue which is of some importance.

To my mind I suppose the best defence for the assembly--that is to say, the best guarantee that it will be adequately funded by future governments, whatever their political make-up--is that there should be full and adequate statements, preferably made to Parliament and to the assembly, concerning the detail of the funding, how it is made up and whether there are any special allocations included that do not come under the Barnett formula, for example in order to provide for higher education on a basis that compares with university institutions in other parts of the United Kingdom. If we are to have full and comprehensive statements made in both parliaments--if it is appropriate to use that term--then we shall begin to have a defence in future and we shall begin to have a basis on which we can proceed, not on the basis of a rigid formula, or of a formula that may be subject to subsequent change but will always be flawed, imperfect and inadequate, but to a formula and a clear declaration by Ministers of what other factors they have taken into account in making their allocations, what additional items they have included, or what they may have taken away in allocating the funds.

It is only by having openness and the ability of Parliaments to audit and debate what they have done that we provide an adequate defence both for the Parliament of the United Kingdom that the money is being properly distributed and allocated in an

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appropriate manner and for the assembly in Cardiff that it is being adequately provided for and knows the basis on which its provision is made.

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