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Lord Williams of Mostyn: My Lords, I believe that the noble Lord is perfectly entitled to raise this matter and to have it discussed.

Lord Dixon-Smith: My Lords, I am extremely grateful for that and I shall attempt to explain briefly the effect of the amendment. It is an attempt to put on the face of the Bill a method of calculation for the funds for which the Welsh national assembly will have to be responsible. In so doing, I say to all noble Lords in the Chamber that if we can achieve it, that is a great insurance for the funding of that assembly.

Everything which is taking place at present in the field of devolution is building up to the point at which there is likely to be an English backlash. If we have something like this on the face of the Bill, although I agree that it provides a method by which the formula can be changed, it also ensures that funding for the Welsh national assembly can be guaranteed into the

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future on the basis of legislation--that is as opposed to the present situation in which, as my noble friend on the Front Bench pointed out, the Welsh national assembly's funding depends on the success of the Secretary of State for Wales in his negotiations not just with the Chancellor of the Exchequer but within the Cabinet. If he is a good Secretary of State, he will secure a good volume of funding. However, one can envisage circumstances in which he may be metaphorically sand-bagged or, perish the thought, "handbagged" into something which may be less advantageous.

Lord Islwyn: My Lords, I have listened to the noble Lord with great care. I am sure that he will be aware that my noble friend Lord Barnett has indicated that Wales is under-funded under his formula at present.

Lord Dixon-Smith: My Lords, I shall deal with that point. However, I should point out that as I understand the Barnett formula, it never considers what I regard as the base block of Welsh expenditure, but it applies the increases pro rata.

My formula goes to the heart of the base block. It is essentially population-based. I had to consider whether that was wise given that in respect of local authorities, a population base would be inappropriate because, by and large, local authorities are too small and there can be extremely large variations in demographic factors between local authorities. But once one is dealing with a region or a nation of the size and population of Wales, population becomes a valid factor, albeit I have varied it to a small extent to take account of the lower population density of Wales which is not as low as the very low population density of Scotland. That is why I have tabled a different amendment in relation to Scotland. It is right, however, to acknowledge that particular factor. After that, we can leave it aside.

Two other factors are involved. The first is relevant public expenditure. Public expenditure in Wales is a vastly greater figure than the expenditure which will be delegated to the national assembly for Wales. Therefore, I have concocted that phrase "relevant public expenditure", which is that proportion of public expenditure which is delegated to the national assembly of Wales in relation to, or as a percentage of, total public expenditure for Wales.

One then takes that percentage figure and applies it to national United Kingdom public expenditure, divides it by the total population of the United Kingdom to reduce it to a per capita figure, and multiplies that by the population of Wales.

I have also introduced a third factor, namely, the relative prosperity or, if one wishes to be pessimistic and look at it that way, the relative poverty of Wales. I have produced a sliding formula which would increase the amount for public expenditure if Wales were relatively unfortunate and relatively less prosperous and which, of course, would diminish it if that were turned round and it became of more than average prosperity.

It could be argued that the slope on the graph that I have produced is too steep. In fact, I believe that Wales would probably do extremely well out of my formula.

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As it stands at present, the Welsh GDP per head, which I have used as a measurement of prosperity, is quite low relative to the UK average. Therefore, the Welsh would get considerably enhanced public expenditure and I believe that that would be right. If, as a result of that enhanced public expenditure Welsh prosperity began to increase, so the volume of public expenditure would go down and there would come a point at which it might even go below the UK average if Welsh GDP per head went above. If one looks at what has happened over a 20-year or 30-year period in Scotland, it will be seen that the Scots have moved from a period of relative poverty to a situation now where they more or less match the average GDP per head for the United Kingdom, although there is some debate as to whether they are immediately above it or below.

My formula takes all those factors into account and would produce a finite sum. If it were on the face of the Bill, that finite sum would be due to Wales and there would be nothing that a future Secretary of State or Chancellor of the Exchequer could do about it. In order to avoid the need to recalculate that sum annually, there is also a provision which says that it needs to be recalculated only triannually. That is in line with the practice of the Chancellor of the Exchequer of trying to have triannual calculations of funding to produce a degree of stability. There is also a mechanism to permit the formula to be changed by affirmative order in both Houses of Parliament, after consultation with the Welsh national assembly should that prove to be necessary.

In all seriousness, I do not expect the Government to adopt my formula. I also stress that I have no desire to supplant the name of the noble Lord, Lord Barnett. Indeed, I would rather that he were present this evening so that he could adopt my formula as "Barnett Mark II", because it seems to me that that is what it sets out to be.

I shall finish where I began. My proposal would be a great security for the future of the Welsh national assembly because its funding would be on the face of the Bill, whereas at present it is dependent on the good will and success of the Secretary of State for Wales in negotiation with the Government. We should not assume that the present apparently happy situation for Wales will continue for all time.

9.15 p.m.

Lord Dean of Beswick: My Lords, I listened with care to what the Opposition spokesman said about his amendments. One tries to keep pace with events which are relevant to what we discuss in this House as they are taking place. The noble Lord said that he had no idea of the value of the settlement or of how much money was involved. However, I understand that that has already been announced. Nevertheless, there is reference to it in today's edition of the Financial Times. With the leave of the House, I shall quote from the article, which says:

    "With an eye to the devolution elections in Scotland and Wales next May, Gordon Brown [has] provided significant"--

I emphasise "significant"--

    "real terms increases for the Scottish Office and the Welsh Office".

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But nothing is said there about what has been provided for England; in other words, whether it will remain static or whether our percentage has been increased. Indeed, nothing is said about it. We have been left out completely in the cold in terms of announcements.

I took the trouble to read in detail in Hansard what was said yesterday by my noble friend Lord McIntosh while repeating the public expenditure Statement. Again, for the benefit of the House, I shall repeat what he said:

    "At every stage we are linking investment to reform and it is on this basis that the Education Secretary tomorrow will announce the biggest single investment in education in the history of our country. In this and in other services there will be separate announcements based on the Barnett formula for Scotland, Wales and Northern Ireland".--[Official Report, 14/7/98; col. 133.]

All those three parts of the United Kingdom--and there may be good reasons for it--are heavy drawers, in debt, if you calculate what they put in and what they have to take out to run the countries. Northern Ireland is grossly overfunded, but that is necessary because of the situation there. The latest figures that I have seen show that Northern Ireland contributed £3 billion, but took out £7 billion. That money was needed for certain measures because the people in Northern Ireland cannot learn to live with one another. However, all that money has to be found from somewhere. There is no one to speak up for England in the same way as there is in Wales and Scotland because the population of England is more fragmented.

I assume that the Chancellor of the Exchequer has reached decisions on this matter with the authority of the Cabinet. The person who knows more about the Barnett formula than anyone else is the noble Lord, Lord Barnett, himself. He thinks that formula has fallen by the wayside and needs to be reassessed. Some £871 more of expenditure is spent on each person in Scotland as compared with England. That is a large sum of money. As I have said, if we brought the expenditure on each person in England up to the level that it is in Scotland, it would cost over £300 billion. That calculation was done for me in the Library. If you multiply 5 million people by £871 that amounts to a great deal of money. To try to find out the relevant figures I tabled today a Question for Written Answer. I asked what the Chancellor's Statement of yesterday means in terms of expenditure on each person in the various areas of the United Kingdom.

There is no question in my mind that some kind of a review must take place. Wales may be getting a bad deal. However, if we continue with the Barnett formula in its present form, Wales will continue to get a bad deal. Certainly England is getting a bad deal. Therefore it appears to me that the only people who are getting a good deal are those north of the Border. I wish someone would tell the Scottish people that because they should have been told about that much earlier.

This is a bizarre situation. This Bill will set the scene in Wales for time immemorial. It will not be changed within the lifetime of anyone here. We have heard catch-phrases about formulae but we do not have any hard and fast figures. It appears that we cannot alter that

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situation; it is almost a waste of time debating it. However, if the differences in expenditure on the various parts of the United Kingdom widen still further that will be a serious matter.

I have been called an English nationalist because sometimes I stand up for England. If I were doing the same for Wales or Scotland, I would be called a patriot. Someone has to say something. The Scottish parliament and the Welsh assembly will act as focal points. In my opinion there will be interminable strife between those bodies and another place. Whatever economic measures the Chancellor of the Exchequer puts in place, they will never be sufficient to satisfy the Scottish parliament and the Welsh assembly. The nationalist parties in those two areas will make sure that that is the situation.

We shall have to examine the Scottish Bill when it comes before this House. Given the way business has been calculated, we shall probably take the Report stage when we return in October. We shall have a hefty meal on the Bill, because the sums will probably be known by then. I am not sure that it is not a deliberate sleight of hand that all these announcements have been made before the Bill becomes law, when it is in its final stages, as a fait accompli, and neither the other place nor this House can have any say as to what is taking place on a major issue such as this. I wanted to make this comment, and to lay down markers in respect of the Bill. This is not the best way to treat another place or this House. I am sure that most Members in the other place do not have a clue as to what will happen in terms of finance for the people they represent south of the Border.

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