Devolved Public Services: Funding

Question

Asked by

To ask His Majesty’s Government what discussions they have held with the newly elected Government of Wales regarding the funding of devolved public services.

My Lords, on 18 May the Secretary of State for Wales held her first call with the new First Minister of Wales. The Secretary of State made clear the benefit of the UK and Welsh Governments working together on shared priorities around public services and economic growth. That follows on from a call held between the Prime Minister and the new First Minister, during which the Prime Minister offered to meet in person in June to discuss shared issues and priorities.

My Lords, is the Minister aware of the huge controversy in Wales arising from the UK Government’s refusal to provide Barnett consequentials for capital rail projects such as HS2 and the Oxford to Cambridge rail link, on the spurious pretext that such south-east of England schemes are of direct benefit to Wales? To open a new chapter on major project funding, will the Government please consider co-funding two urgent capital road projects of direct benefit to both Wales and England: namely, the tackling of the M4 bottleneck at Newport, which affects the strategic road link between London, southern Wales and Ireland; and secondly, the need for a new road bridge across the Menai Straits to cope with the additional traffic associated with the Wylfa nuclear project? Will the Government be open to discussing those matters?

Of course, the Government are always open to having constructive dialogue with the Welsh Government about new projects—and, indeed, to considering any requests from the Welsh Government. The noble Lord’s question ignores the fact that the UK Government recently agreed a £14 billion plan for the future of Welsh rail, which is far more than the Welsh Government would have received had HS2 or any heavy rail project been developed. I should point out that work is already under way, with nearly half a billion pounds having been secured in the year’s spending review, which will deliver new stations for the Welsh railway network and faster journeys and better services for passengers, connecting people to jobs and unlocking 12,000 jobs in Wales. However, we will of course continue to discuss future capital projects with Welsh Government.

My Lords, as a former chief adviser to the previous First Minister, I encourage Ministers to take a positive attitude towards the new Government in Wales, even if it is not of the colour I would have wanted, and to continue those talks. While endorsing everything the Minister has said about the efforts made for greater rail investment under this Labour Government following the 2024 general election, I am unclear just what the new First Minister of Wales is asking for in relation to the M4 relief road. When interviewed recently at this year’s Eisteddfod, he said, “Something must be done”, but I was not sure whether he was actually asking for the M4 relief road to be built. Through the Prime Minister, will the Minister find out from the First Minister of Wales what exactly he means by that?

I agree with my noble friend that we have cause to meet requests from the Welsh Government—we need to receive them properly, understand them and have clarity about what they want. We will continue to work constructively with this Welsh Government, as we worked constructively with the previous Welsh Government, but we need to understand what exactly they wish to see happen, rather than just saying, as my noble friend pointed out, that something needs to be done.

My Lords, I congratulate the noble Lord on his party’s success in the Senedd elections. I also acknowledge the success of Welsh Labour’s D’Hondt system in achieving the most proportionate result in Senedd elections to date. In contrast, the 2024 UK general election, held under first past the post, saw Labour take 63% of parliamentary seats on a 33.7% vote share. I ask the Minister: when will the rest of the UK catch up with the devolved nations and introduce a fair voting system which reflects the proportion of votes cast?

My Lords, I wondered how quickly we might divert away from the question relating to Wales. I salute the noble Baroness’s ingenuity in talking about proportional representation. We have other devolved settlements with mayoral authorities to introduce more proportional ways of voting, but I point out that not that long ago, we had a national referendum on moving to a more proportional way of voting for general elections and an alternative to first past the post—I see some close observers of electoral systems are dissenting from my observations, so I will say “moving away from” first past the post—and that was resoundingly rejected by the British public.

My Lords, Lord Barnett was an outstanding public servant as a Manchester Member of Parliament and a Treasury Minister under the Callaghan Government, and he was given the task to come up with this formula in 1978 to placate the Scottish nationalists. I had the good fortune to spend some time on trains from Manchester to Parliament, and I remember that about 10 or 15 years ago he expressed his surprise that that formula was still in place with his name on it. He said that it was past its sell-by date, was unfair to British taxpayers and should be abolished or reformed. What plans do this Government have in mind to reform the Barnett formula now that we have a nationalist Government in Wales?

I say to the noble Lord that just because something has been in existence for a long time does not mean that one necessarily has to think about reforming it as a matter of course. I inform the noble Lord, though, that the fiscal framework that has already been agreed between the UK and the Welsh Government added a needs-based factor into the Barnett formula to ensure that Wales receives fairer funding. As a result, the Welsh Government are receiving over 20% more per person than equivalent UK Government spending across the rest of the UK. The Institute for Fiscal Studies, no less, suggests that moving towards a different system, such as a needs-based system, could see the Welsh Government losing out on funding.

Will the Minister be able to outline the steps that are being taken by the Government to review the intergovernmental structures for co-operation between Cardiff, Westminster, Edinburgh and Belfast, and to ensure that these are strengthened over the next few months?

We continue to work in close partnership with the devolved Governments and with the English regions through agreed structures. The Prime Minister and the Chief Secretary to the Prime Minister, who is also Minister for Intergovernmental Relations, regularly engage with the heads of devolved Governments and their deputies through the top-tier intergovernmental relations meeting and the Interministerial Standing Committee. They will now also regularly attend the mayoral council. As I said in my initial Answer to the noble Lord, Lord Wigley, the Prime Minister is undertaking to meet the First Minister of Wales, the First Minister of Scotland and the Deputy First Minister of Northern Ireland in the very near future.

My Lords, the outcome of the recent Welsh elections should worry unionists across this House, but the Government’s much-vaunted Council of the Nations and Regions last met over a year ago, despite a commitment to meet twice a year. What role will the council play in strengthening the union, if indeed it ever meets again? Can the Minister rule out any real-terms cuts in funding for Wales?

As I just said in answer to the noble and learned Lord, Lord Thomas, we are absolutely committed to talking to the devolved Governments and we will convene the Council of the Nations and Regions on a case-by-case basis as needed. To be clear, this Government were elected on a mandate to protect the union, as previous UK Governments were, so we will refuse any request to go down any path that would break it up. We are clear about this and want to work with all types of structures to strengthen the union. On the second question that the noble Baroness got in at the end, I will not be tempted into talking about future funding promises without Treasury approval.

My Lords, we may receive more per head of population, but do the Government recognise that Wales is at or near the bottom of all the indices of deprivation in the UK? So what direct benefit, if any, will we receive from HS2?

I repeat what I said to the noble Lord, Lord Wigley: we are investing a huge amount of money—£14 billion—in the future of Welsh rail. Also, creating more capacity on the west coast main line will in the long term provide great benefits to north Wales through the extension of the main line that already goes up through the west coast main line and serves north Wales.

My Lords, apart from a fair rail infrastructure allocation, which is absolutely needed—the Welsh Government are owed £4 billion for HS2 being misnamed as being for England and Wales—the Welsh Government are asking for other things, such as devolution of policing and justice and of the Crown Estate. Where do the Government stand on those issues?