Orders of the Day — Government of Wales Bill

House of Commons, 3 February 1998.

GRANTS TO ASSEMBLY

Richard Livsey (Liberal Democrat, Brecon and Radnorshire)

I beg to move amendment No. 387, in page 38, line 28, leave out from 'Parliament' to end of line 29.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

With this, it will be convenient to discuss the following amendments: No. 369, in page 38, line 29, at end insert ', and the totality in any financial year of such amounts shall be no less than a totality produced by the application of the Barnett Formula. (1A) In this section "Barnett Formula" means the non—statutory mechanism for calculating, on the basis of proportions of population, the equivalent changes to the budgets of the territorial departments following changes to programmes and budgets in England.'.

Richard Livsey (Liberal Democrat, Brecon and Radnorshire)

Amendment No. 387 removes the words of such amounts as he may determine", but permits the Secretary of State to make payments to the assembly. It paves the way for amendment No. 388, which represents the input and impact that Liberal Democrats seek. The purpose of the amendments is to put the Barnett formula into the debate on the assembly and how the assembly should be financed. They seek to remove the Secretary of State's flexibility in determining payments to the assembly. Clause 80 uses the phrases "from time to time" and of such amounts as he may determine". That does not provide a concrete funding formula on which the assembly can develop long-term funding plans. The Barnett formula has been used for Wales since 1980. The fact that it has been used for almost 20 years is an indication of its success and widespread acceptance as an adequate solution to the problem of funding Wales and Scotland to take account of the particular needs of those countries. The Barnett formula has tended to preserve higher expenditure per capita in Wales than in England. That is important because the cost of providing many services in Wales is much higher than in England. Although that is largely due to the sparsity of population in mid-Wales and north Wales, it is also due to quite high levels of social deprivation in south Wales and other parts of the country. That will not change when the assembly begins its work, so its budget should be based on the same principles as now. The Barnett formula is non-statutory. Our amendments would provide a statutory basis for securing its principles, which, of course, relate to the annual change. Amendment No. 388, however, recognises that the formula may not be the most appropriate long-term solution to the problem of funding Scotland and Wales. Perhaps some of us would prefer even higher funding, given the low level of gross domestic product that Wales has achieved, particularly over the past 10 years. Proposed subsection (1D) therefore includes provisions for a joint review of the funding formula after the assembly has existed for 10 years. Page 25 of the White Paper states that the present arrangement for deciding the size of the budget allocated to Wales will be retained. Our amendments seek to include that commitment in the Bill, so that it is quite clear from where funding for Wales is derived. We also support amendments Nos. 435 and 438, which would allow the particular problems of deprivation and sparsity of population in Wales to be considered when the assembly's budget is determined. As an hon. Member who represents a rural constituency, I know only too well the problems of population sparsity and the importance of achieving a fair settlement on sparsity factors. One has only to consider local education authority school transport bills, for example, to realise the enormity of the problem. I have great pleasure in commending the amendments to the Committee.

Denzil Davies (Labour, Llanelli)

I shall speak to amendments Nos. 369 and 371, which are in my name and the name of my hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands). Amendment No. 369 deals with the Barnett formula, and I shall return to it later. I should mention to the Under-Secretary of State for Wales, my hon. Friend the Member for Neath (Mr. Hain), that amendment No. 371 is a probing amendment to clarify what is meant by clause 80(2), under which, apparently, any Minister of the Crown will be able to make payments to the assembly. Apparently, those payments will not specifically be from money provided by Parliament. What payments are envisaged and why are they not from money provided by Parliament? I suspect that such payments would have been from money provided by Parliament before the transfer. The hon. Member for Brecon and Radnorshire (Mr. Livsey) explained the Barnett formula. Given that—I think—we are all well aware of its intricacies and details, I shall not have to try to explain it again either to myself or to anybody else. There is a magical figure of 6.02 somewhere or other, which is supposed to indicate the relationship between the populations of Wales and England. The figure is higher than it would otherwise be, which means that any increase in the block grant for the Welsh Office is slightly greater than the corresponding increase for England. Conversely, of course, if there is a decrease, the resulting decrease is greater. We shall, therefore, lose out if there are reductions in expenditure. I have no doubt that the Minister will give a number of reasons why the Barnett formula should not be incorporated into the Bill. We shall be told that the Barnett formula covers only the block grant to the Welsh Office and not other expenditure in Wales. For example, about 8 or 9 per cent. of total United Kingdom social security expenditure, including income support and spending on disability, is spent in Wales. That is higher than the percentage of the United Kingdom population who live in Wales and higher than the figure in the Barnett formula, which shows—I say this as an aside—how dependent Wales is on those social security payments. It will be argued that there is no need to include the Barnett formula in the Bill because the Government say—I entirely accept their statements—that they have no intention of changing it. Another argument against the formula's inclusion is that no Parliament can bind another Parliament. I broadly accept those arguments—there may be others—but the Barnett formula is all that we have. My hon. Friend the Minister looks as though he agrees with me. If he wants to introduce a better and more sophisticated system, we shall accept it. I accept that this Parliament cannot bind its successors, but it is better that such provisions are included in a Bill than in an order or Government statement. If there is nothing better on offer, the Barnett formula should be entrenched in the Bill. Last week, I think, my hon. Friend the Member for Cardiff, West (Mr. Morgan) rightly said that a scheme of devolution needs both a dispute resolution procedure and a resource allocation system.

Rhodri Morgan (Labour, Cardiff West)

A resource transfer mechanism.

Denzil Davies (Labour, Llanelli)

As my hon. Friend says, a resource transfer mechanism. The Bill provides, to some extent, for a dispute resolution procedure. We find tucked away in schedule 6 the proposal that, in any dispute between central Government and the devolved assembly, the Wales and Chester circuit will have the opportunity to appeal to the Judicial Committee of the Privy Council. No doubt the lawyers will be delighted at that—I see the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd) perking up. There is an irony in that proposal. Traditionally, the Judicial Committee of the Privy Council has heard such appeals from overseas territories, dependent territories and colonies. Nevertheless, at least there will be a dispute resolution procedure. The Bill contains nothing about a resource transfer mechanism. That is why I argue for the inclusion of the Barnett formula, which would provide some means—albeit imperfect—through which to decide how resources can be transferred. The lack of such a mechanism is a substantial weakness in the Bill. We are engaged in finding a constitutional settlement. Whenever one makes a criticism, one is immediately put in the "No" camp, but I have no objection to devolution. I object to the lack of a proper constitutional settlement for the protection of Wales. England does not need a Barnett formula, and I suspect that the Scots do not any longer need a Barnett formula, either—their budget just about balances.

Tam Dalyell (Labour, Linlithgow)

What the right hon. Gentleman says is not the received wisdom in Edinburgh.

Denzil Davies (Labour, Llanelli)

I shall not stray further into Scottish matters and the question of Scottish wisdom or otherwise. Wales needs such a mechanism, however, and it should be entrenched in legislation to protect the Welsh against the English. I have great respect for the English as a nation and as a people, but I have never trusted them. I am surprised that the Welsh nationalists, having accepted some of the baubles offered by the London Government, now seem to trust the English. Personally, I do not trust them, although I respect them, which is why I want the Barnett formula included in the Bill—I want Wales to be protected. During the referendum campaign and in our consideration of the Bill, there has been a romantic belief that everything will be the same after devolution and after the Scots have all gone back to Edinburgh to practise their received wisdom. A few days ago—I think that it was when we debated the order-making powers—my right hon. Friend the Secretary of State referred several times to the unitary Government. I made a mental note of it: he kept saying that the unitary Government will do this but not that. I do not want to split hairs, but there will be no unitary Government—in any meaningful sense—after the Bill has been enacted and after the Scottish Parliament has been established. There will be a central Government, but not a unitary Government in the form that we have known for many hundreds of years. The central Government will try to balance the conflicting interests of the three nations of Britain—the Scots, the Welsh and the English. I exclude Ireland, as I am talking about Britain, not the United Kingdom. There will be competition for resources. Decisions that a unitary Government would naturally make behind closed doors—no one would even think about it—will have a greater transparency, and resources will be the prime subject of dispute between the three nations of this British state. We are told that the Secretary of State, be it my right hon. Friend or anyone else, will fight hard in Cabinet to maintain the block grant for Wales. Alas, the Secretary of State will have no Department in a Cabinet where everyone else—with the exception of the Secretary of State for Scotland—will have one. The system in Whitehall is governed by Departments—civil servants and Ministers carry the views of their Departments into Cabinet. The Secretary of State for Wales will be in a weaker position than his Cabinet colleagues.

Gareth Thomas (Labour, Clwyd West)

I am intrigued by the fact that my right hon. Friend does not have more ambitious aspirations for Wales. Does he accept that, if the process of allocation of resources is more transparent, a genuine debate will be fomented about the assessment of need within the constituent parts of what will remain the United Kingdom? There may be no unitary Government, but there will be a unitary Treasury, so to speak.

Denzil Davies (Labour, Llanelli)

My hon. Friend trusts the English: I do not. The argument will be between Secretaries of State who will see themselves more and more as Secretaries of State for their responsibilities in England. The Secretary of State for Trade and Industry will be a Secretary of State for English trade and industry, and the Minister of Agriculture may go the same way. The Cabinet will more and more be a Cabinet for England, because England will be the prime concern of its members. Once we have unbundled the unitary state, we shall have three nations in Britain.

Rhodri Morgan (Labour, Cardiff West)

I may be confused about the timing of the invention of the Barnett formula—which has operated reasonably successfully in protecting the level of the Welsh and Scottish block grants—but I thought that it was developed to cope with the devolution that was anticipated in 1979. I recognise my right hon. Friend's expertise as a Treasury Minister at that time. Does he agree that the real risk to the Welsh block grant—and any preferential levels of Welsh public expenditure—would have arisen if Welsh devolution had never been proposed in 1978 and 1979, even though it subsequently went down in flames? Without the proposal, the Barnett formula would never have been invented.

Denzil Davies (Labour, Llanelli)

I understand that point. The Barnett formula was not entirely new, and there was a previous formula under Goschen some years before. As a Chinese philosopher once said, there is little new under the sun. The Barnett formula was devised to cope with devolution, but I do not understand my hon. Friend's point. Once the unitary state is unbundled, the question of resources will assume—

Gareth Thomas (Labour, Clwyd West)

The point that my hon. Friend the Member for Cardiff, West (Mr. Morgan) makes is that the Barnett formula was predicated on administrative devolution. What distinction is there in principle between democratic devolution to accompany the administrative devolution that exists, and the original presupposition behind the formula?

Denzil Davies (Labour, Llanelli)

We are not arguing that point. I approve of the Barnett formula and I was a Treasury Minister when it was devised, although my colleague Lord Barnett dealt with it. I want to see the formula in the legislation, and I take it that my hon. Friends agree with me.

Rhodri Morgan (Labour, Cardiff West)

I agree that, had it not been for the devolution measure of 1979, which went down in flames, the Barnett formula would never have been developed.

Denzil Davies (Labour, Llanelli)

That may be true, but I still do not see what conclusion my hon. Friend is trying to draw.

Michael Ancram (Conservative, Devizes)

I wish to take advantage of the fact that the right hon. Gentleman was a Treasury Minister at the time. Was not the Barnett formula a secret for two years, before George Younger announced it to a Select Committee? Does that tally with the formula being developed to cope with the coming devolution?

Denzil Davies (Labour, Llanelli)

The right hon. Gentleman is correct. The formula was in existence before it was revealed to make the position more transparent. However, we are all now in agreement that the Barnett formula is marvellous. My right hon. Friend the Secretary of State will be pleased that Labour Back Benchers are completely unanimous—not for the first time—in wanting to see the Barnett formula in legislation.

Rhodri Morgan (Labour, Cardiff West)

indicated assent.

Denzil Davies (Labour, Llanelli)

My hon. Friend agrees. In some ways, our debates on the Bill are very romantic. Yesterday, the hon. Member for Ynys Mon (Mr. Jones) suggested that the First Secretary of the Welsh assembly could sit in the Council of Ministers and negotiate on behalf of the United Kingdom, even though he or she would not be a member of the Cabinet or of the Government. That is an illustration of the cloud-cuckoo-land nature of some of our debates.

Ieuan Wyn Jones (Plaid Cymru, Ynys Môn)

If the right hon. Gentleman cares to read the contribution from the Under-Secretary of State for Wales, the hon. Member for Bridgend (Mr. Griffiths), at the end of the Second Reading debate, he will discover that those words came from his hon. Friend's mouth.

Denzil Davies (Labour, Llanelli)

I am sorry if the romanticism I mentioned has even infected those seated on the Treasury Bench. I have no doubt that my hon. Friend the Under-Secretary of State will make up his mind without my intervention. As our debates have proceeded, concordats have been mentioned. They have not been trotted out yet, because they are still frantically being drafted. What are the concordats for, except to try to plug the gap that I have mentioned? Did someone at the Institute of Welsh Affairs say, "Yes, we have a problem. The Secretary of State will no longer have a Department and the Welsh assembly will not have the entrée into Whitehall that a Department has. Let us think of something to try to plug the gap in the devolution scheme." The result is the concordats, which are an acceptance that a problem will arise in the relationship of the First Secretary and the assembly with other Departments, including the Treasury. Who will be party to the concordats? Will there be a concordat between the assembly and the Treasury? Is such a concordat being drafted already for the Treasury's consideration? Will it contain the Barnett formula?

Dafydd Wigley (Plaid Cymru, Caernarfon)

It will be too late then.

Denzil Davies (Labour, Llanelli)

I do not know whether it will be too late. A concordat would be second best, but it would be an attempt to plug the gap. If there were no gap, there would be no need for the concordats. I hope that when the Secretary of State winds up, he will tell us whether the assembly will have a concordat with the Treasury. If so, I take it that the Barnett formula will be a central part. At least it would then be in the concordat, although that would not be as satisfactory as having it in legislation. The second reason why we need the Barnett formula—or something better—in legislation is a continuation of the first reason. Sadly, Wales is the poorest country in Britain. It is probably not quite as poor as Northern Ireland, although there is not much in it. Wales is a dependent nation. Dependency is considered bad these days, but Wales—and we must be realistic, especially as we move towards devolution—is dependent on the English taxpayer. As I said before, England does not need a Barnett formula. The Scots may need one, but Wales certainly needs one because it is the poorest country. If it came to negotiation in the future without such a formula entrenched in legislation, Wales would be at the mercy of those terrible English who cannot be trusted on such matters. I shall briefly describe the unpleasant state of Welsh dependency which means that we need a Barnett formula. Over the years, the Welsh Office and other Departments have produced regional budgets. I commend them for that because it is not easy to produce a regional budget. It is perhaps easier now, with computers, than it used to be 20 years ago, and more statistics are now available. However, the relevant figures are easy to extrapolate and we have debated them before. The last Welsh regional budget was for 1995 or 1996 and it showed that the difference between the income raised in Wales by taxation and the amount of total public expenditure spent in Wales can amount to £4 billion or £5 billion a year. That figure may not mean anything, but if I were to translate that into the Maastricht criteria on budget deficits, which is a rule of thumb that people use, my calculations, which have never been properly challenged, show that the Welsh budget deficit would be about 14 or 15 per cent. of Welsh gross domestic product. Greece has a budget deficit of about 7 per cent. of GDP. No country could ever fund the sort of deficit that Wales has—it would be impossible to operate with a deficit of nearly 15 per cent. of GDP. The Administration would have either to cut expenditure or to try to raise taxes, but raising taxes in that situation would be absolutely hopeless. Somebody calculated that to balance the Welsh budget—balancing budgets is fashionable these days; everyone tries to do it and apparently President Clinton has managed not only to balance the budget, but to produce a surplus—our public expenditure levels would have to be on a par with those of Slovakia, which is one of the poorest countries in central Europe. That is the reality of the situation. I sit here listening to speeches from the Welsh nationalists in which they call for more power for this and more power for that, but they do not make any attempt to consider or discuss where the money will come from to enable that power to be exercised. The Welsh Liberal Democrats are even crazier; they want to have a power to vary taxation—

Richard Livsey (Liberal Democrat, Brecon and Radnorshire)

Quite right.

Denzil Davies (Labour, Llanelli)

A power to vary taxation means putting it up or bringing it down, but if there is a budget deficit of 15 per cent. of GDP and if the economy has not got a tax base that comes anywhere near to covering public expenditure, the idea of putting up taxes is simply mad. If public expenditure is not covered by taxes to the tune of a 15 per cent. difference, cutting taxes is also mad. I cannot understand why the Liberal Democrats, who obviously have not looked at the Welsh economy, want the power to vary taxes in an economy with a budget deficit of 15 per cent. of GDP.

Cynog Dafis (Plaid Cymru, Ceredigion)

Local government has that power, and plenty of local authorities have that sort of deficit.

Denzil Davies (Labour, Llanelli)

Yes, and the position is becoming worse, if I am to believe what I read in the Western Mail today, but that is no real answer. My point is that it is irrelevant and nonsensical to have powers to increase or reduce taxes when the Welsh economy is in such a dependent state.

Richard Livsey (Liberal Democrat, Brecon and Radnorshire)

The right hon. Gentleman is making great play of Liberal Democrat policy, but that policy is strictly limited in terms of upward or downward variation of taxation—it is marginal in terms of the overall situation, and I am sure that, as an economist, he recognises that.

Denzil Davies (Labour, Llanelli)

I certainly do not accept that I am an economist and I hope that the hon. Gentleman will withdraw that statement.

Richard Livsey (Liberal Democrat, Brecon and Radnorshire)

indicated assent.

Denzil Davies (Labour, Llanelli)

I am glad to hear that the Liberal Democrat party's policy is marginal in this respect, but whether marginal or not, the point is one of principle; it makes no sense to increase taxes even marginally in an economy such as that of Wales. The same is true of the Welsh establishment. There is now a body called the Institute of Welsh Affairs which churns out paper and, if my analysis is correct, it is wholly funded by the English taxpayer. One of its suggestions was that the number of Members of the Assembly should be doubled from 60 to 120, but there was no attempt to say where the money would come from. We know that the Secretary of State will take a chunk out of the budget first and that the assembly then will have to pay its way out of the budget for hospitals and schools. The Institute of Welsh Affairs has shown no awareness or understanding of the real economic problems facing Wales, and it gives me no great pleasure to point that out. The city of Cardiff would disappear down an economic black hole if Wales had to balance its budget, because that city exists because of public expenditure. Every establishment is parasitic on public expenditure, but the Welsh establishment is more parasitic than any other in the western world, because it is almost totally dependent on public expenditure. There is, however, no awareness in Wales of the real enormity of the problems of the Welsh economy. That is why we need to have a proper financial resource settlement in the legislation, so that in future, Wales will not be at the mercy of cuts or of attempts to create surpluses in public expenditure—or whatever the latest economic fashion might be. I hope that my right hon. Friend the Secretary of State will consider my points, although the time to do so was probably before the White Paper was drafted in that dreadful Cabinet Committee chaired by the Lord Chancellor. The opportunity was either missed or stopped—I do not know which, and I doubt that my right hon. Friend will rise to speak on that subject. Having said that, there may be an opportunity before the Bill returns to the House of Commons to look at this issue again. It is in the interests not of any of us here, but of Wales, that Wales is protected in future in terms of public expenditure.

Michael Ancram (Conservative, Devizes)

It is always a pleasure to follow the right hon. Member for Llanelli (Mr. Davies) and, although I do not necessarily agree with his solution to the problem as set out in his amendments, I agree with much of his analysis. I am sure that we all agree that we are now discussing one of the central parts of the Bill. Devolution was sold to the people of Wales on the basis that financial provision from the United Kingdom, which is channelled in part through the Barnett formula, would not change. That was the claim made in the White Paper and the constant pledge made by the Secretary of State during the referendum campaign. It is also written into the explanatory and financial memorandum to the Bill, although, as the Secretary of State well knows, the moment the Bill becomes an Act—if he achieves that—the explanatory and financial memorandum will fly off and there will be no mention of the Barnett formula in the statute, so its presence now is of fairly limited value. The reason all those assurances were given is that, without such assurances, the Bill would be a mess of pottage—and a cold one at that. Because those assurances had been given, we all expected to find them on the face of the Bill, so clause 80 came as something of a surprise. Clause 80 states: The Secretary of State shall from time to time make payments to the Assembly out of the money provided by Parliament of such amounts as he may determine. That is hardly an assurance. There is no definition of "from time to time", whether it means an annual, monthly or five-yearly payment. There is no description of the amounts and no criteria for calculating them. There is even no identification of which Secretary of State is being talked about, because under the Bill it could mean any relevant Secretary of State. Whichever Secretary of State it is, the only thing that is certain is that the determination is not bound in any way but is entirely at his discretion. That is what appears on the face of the Bill. There is therefore nothing that tells us to what the payment will relate and nothing that assures us that it will not be totally at the whim of the Westminster Government of the day. If the clause does refer to a Secretary of State for Wales who is arguing his case within that Government, we need to remember that he will have lost almost all influence and clout, because his powers will have been transferred to the assembly. I am sure that we shall be told that such details are not put on the face of Bills, to which my answer is that, in the past, they have not needed to be. I happen to agree—this is why I disagree with the right hon. Member for Llanelli—that detailed formulas should not be included in legislation: circumstances and definitions can change, and formula setting by primary legislation is an inflexible tool; but that does not mean that there should be no criteria whatsoever on the face of the Bill. I am sure that we shall also be told that what has gone on before will continue and that, in a sense, nothing has changed; but a lot will have changed. What will have changed specifically is that the issue will no longer be one of making financial arrangements and provisions between Ministers and Departments in the same Government, but one involving two different Administrations and sets of politicians who might not see eye to eye. I have spoken before about testing constitutional change against the worst-case scenario, and we must take into account the fact that there may be times when the Administrations in Cardiff and in London are of different political complexions or hold different economic views, yet there is nothing in the Bill that gives us any comfort on that score.

Peter Hain (Labour, Neath)

I find the right hon. Gentleman's concern for Welsh finances and the Welsh economy touching. Let us not forget that when he was a member of the previous Government, one Secretary of State for Wales, the right hon. Member for Wokingham (Mr. Redwood), boasted of sending millions of pounds from Wales back to the Treasury. The right hon. Gentleman supported his right hon. Friend's policy.

Michael Ancram (Conservative, Devizes)

We welcome the Minister to the Chamber for the debate. We had been wondering whether there was something ideologically wrong with his views on devolution, because he has hardly been seen during our deliberations. It is typical that he should take refuge in that type of argument. We are talking about the protection of Wales in the future. I expressed my concern about that throughout the referendum campaign, and I was accused of scaremongering. I also expressed my worries when the White Paper was published. We waited until the Bill was published to see if it improved matters, but because it is as it is, I must repeat my anxieties. I am sure that we will be told that the funding will be agreed under concordats. Hon. Members may remember that, yesterday, the Under-Secretary, the hon. Member for Bridgend (Mr. Griffiths) said that concordats could not be binding beyond one Parliament. It would not take primary legislation, or even secondary legislation to change them, merely a decision to abandon them—a decision that could be taken unilaterally. I am fascinated by the concept of concordats. Will they be presented to the House for parliamentary approval? If so, does that give them an enforceable standing that they would not have otherwise? I would love to know the answers to those questions because we talk about concordats as though they were something special and reassuring, but none of us know what they are other than that they are informal agreements of a non-lasting nature. If I were a lawyer advising my client as to whether to sign away his birthright on that basis, I would tell him that he was off his head even to consider what was on offer. The next cry we will hear is, "Why are we worrying about it?" We will be told that the current Barnett formula has been in operation for a long time and that the Government have no intention of changing it—that is what the Treasury says. It is perfectly true that, when we were in government, we faithfully, and, frequently, even generously applied that formula to Wales and Scotland. There is every reason to worry, however, perhaps not in the short term, but in the medium and longer term, because times change, as do needs and democratic demands. The Conservative Government believed that the Barnett formula generally reflected need in the area at which it was directed. It is worth remembering two salient features of that formula. First, it does not affect the baseline provision, which has remained based on historic criteria. It therefore does not impinge upon the fundamental area where any calculation of basic need would be made. Secondly, Barnett provides that where comparable changes to programmes in England are made, it results in equivalent changes in the budget of Wales, calculated on the basis of population shares. If the baseline generally reflects need, Barnett provides a population-based formula for dealing with changes to expenditure. We took the view that that generally kept the system in line with need. There are two elements at work. The historic element that should be based on need and the Barnett formula, which is the means of making adjustments. That arrangement is now being questioned, not by Conservatives, but by many who are associated with the Labour party. Labour Members representing the north-east have already demanded that the Barnett formula should be reviewed because they believe that it operates adversely to their interests. The Treasury Select Committee has called for a needs assessment to show whether Barnett remains the best way in which to allocate increases. When Lord Barnett appeared before that Committee, he agreed that there was a case for a review of the formula. The fact is that devolution has rubbed the lamp, and the genie of needs assessment has been let out. He will not so easily be put back in the lamp despite the Treasury's bold attempt in its document, which was published on 8 December. We understand that the formula will continue but that it will be amended to meet the requirements of devolution. Factors relating to domestic agriculture, forestry and council tax rebates will be brought into the relevant blocks. In future, an annual update of the Barnett formula to take account of mid-year population estimates will start in 1999 and 2000, noticeably safely after the assembly elections have taken place. My concerns do not stem from the Treasury document, but from a number of comments and statements that have been made. The clearest one was that contained in the publication entitled "A guide to the Scotland Bill". I accept that that document does not relate to the Bill, but it discusses the Barnett formula and admits that it is—I choose my words carefully—an administrative arrangement, which will not be prescribed in legislation. It is nothing lasting, certainly nothing in any enforceable form, let alone in tablets of stone. In evidence to the Treasury Select Committee, Lord Barnett rubbed the lamp yet further by proclaiming in paragraph 9: there should be a Barnett Formula Mark II based on needs. The review would have to take account of needs, income per head and expenditure per head. In annex D.12 of the Government's White Paper, they admit that any substantial revision of the formula would need to be preceded by an in-depth study of relative spending requirements. Essentially, that means needs. The Treasury Select Committee went further in paragraph 12, when it stated: The Committee was disappointed that no Government studies have been made in relation to the appropriateness of the Barnett Formula and how it relates to needs. The Committee only took evidence relating to the formula. We believe, however, that it is time to bring the needs assessment up to date; this would help to show whether the Barnett Formula remains the appropriate method of allocating annual expenditure increases … to the four nations of the Union. There again, the needs element is the genie that has been taken out of the lamp. Concern about the need for a review is not new. Paragraph 11 of the Treasury Select Committee report cites the evidence of John Gieve, the deputy director of general expenditure at the Treasury, who agreed that there is a long-established practice of looking at the allocation of spending across programmes and across regions to try and get the right distribution. I cannot think of any government which would say that it was not interested in whether the distribution between areas or between services did not reflect relative need … all governments would subscribe to the fact that spending should broadly reflect needs. Once again, it is clear that the pressure caused by the development of the devolution package has reopened the issue of needs. I am not arguing for a change in the current arrangements. I am merely reflecting the fact that the demands for change in the formula are already running hard and that, in particular, the Bill offers no defence against them and no limits on them. Indeed, it does not even start to try to do so. We always warned that the demand for change would be one of the corollaries of devolution, but at the time we were accused of scaremongering. It gives me no pleasure to see that we have been proved right. We now must find a way in which to protect the position of Wales to ensure that, despite the best endeavours of the Secretary of State, the people of Wales are not asked to sell their birthright for such a mess of pottage. Anecdotal evidence suggests that Wales would not fare badly from any assessment of need or anything that recognised that as the basis for making provision. We look first to the Bill to protect that position, but it is not only silent but complacently so on the issue. There are no indications of how, when or in what circumstances, and according to what criteria the assembly would be funded, or by whom. There is no provision for the assembly to make any representations to Westminster about what Wales needs. Even the Stormont Government had that right. All we have is a complacent fallback on an administrative arrangement and the past. Perhaps those arrangements and the Barnett formula work where the demander and the provider are part of the same Administration, operating a friendly formula for resource allocation, but that ball game will have passed to one where internal United Kingdom opposition will increasingly raise its head. That is already happening. If the plan of the Labour Government to regionalise England goes ahead, that competition will become even more intense. Where there are disagreements, there are no guarantees that the position of Wales would be protected. Under the Bill, that would depend on the Westminster Government and the Secretary of State—a Secretary of State with no clout or influence.

Michael Ancram (Conservative, Devizes)

I thought that the Secretary of State had clout and influence now, but if the Whip says not, I will accept that from him. The position will have changed after devolution. The Bill cannot afford to be silent on the issue. There is no point in trying to entrench a formula, as suggested in amendment Nos. 369, 388 and 436, because circumstances change, as do political imperatives. A lack of flexibility could be damaging. The right hon. Member for Llanelli argued that that was not so, but an administrative arrangement could be changed and if such an arrangement had been mentioned in a Bill, that legislation could begin to look pretty sorry. There must be some reference point, some criteria in the Bill; that is why we tabled amendment No. 18. We did so because we believe that what we are suggesting will create the discipline needed and provide more than a transient agreement or a political whim. With clause 80 as it stands, the Bill is a hostage to fortune. It is vague, ill-defined and circumventable, and it offers neither assurance nor financial protection. It leaves an enormous void which, if left unattended, will focus resentment and dissent for years to come, play into the hands of nationalists on both sides of the border and, ultimately, do Wales no good. We all know from experience that the Treasury hates criteria that might bind it, but amendment No. 18 seeks to introduce the element of criteria, which will, we believe, protect the interests of Wales. The amendment may not be cast iron. It may indeed be little more than indicative, but, by requiring a statement showing that the payment is based on needs in Wales relative to the United Kingdom as a whole, it imposes certain duties on the Government of the United Kingdom. It will require the Westminster Government, or the Secretary of State, or the Treasury, to make their determination of the sum to be paid according to criteria that are more than mere political and transient judgments—which the present Bill allows for—but are based on facts that reflect the genuine long-term requirements of Wales. On any view, our amendment must be better than the void in the Bill. I seriously hope that the Government will accept it and get themselves out of what is an enormous hole which, by their actions, they are making deeper each day by the digging in which they are engaging.

Ted Rowlands (Labour, Merthyr Tydfil and Rhymney)

I shall speak to amendment No. 369, which is in the name of my right hon. Friend the Member for Llanelli (Mr. Davies) and myself. I want to say two things to the right hon. Member for Devizes (Mr. Ancram). First, he made several pertinent points, which I appreciated, but drew curious conclusions from them. He laboured long over the fact that an assessment of needs would be a dangerous threat to Welsh expenditure. However, if a proper objective needs assessment were made at this moment, the amount of money coming to Wales—regrettably, and for the reasons that my right hon. Friend the Member for Llanelli cited—would increase beyond what the Barnett formula provides. It would not decrease, unless there was total political malice.

Michael Ancram (Conservative, Devizes)

indicated dissent.

Ted Rowlands (Labour, Merthyr Tydfil and Rhymney)

Well, one got the impression that, during half of his speech, the right hon. Gentleman was threatening us with a needs-based assessment, not saying that it was a good thing—but I give way.

Michael Ancram (Conservative, Devizes)

I am grateful to the hon. Gentleman for giving way, because I may not have made myself clear. Amendment No. 18 actually proposed that a needs-based statement be made to Parliament. I said what I did because the Government found their arguments on the fact that a needs-based assessment is unnecessary because the Barnett formula exists. I am saying that, the way that things are moving, I am not sure how much longer it will be used. We must provide against that eventuality.

Ted Rowlands (Labour, Merthyr Tydfil and Rhymney)

We have it at the moment, so amendment No. 369 suggests that the Barnett formula, however imperfect, is at least a basis on which one can plan and think about the short to medium-term financing of the assembly. I have read with interest the Treasury Select Committee Report on the Barnett formula—its second report of 1997-98. The description of the Barnett formula that was made in the Committee and endorsed by Treasury officials was: a non-statutory policy rule based on mutual understanding between parties within the policy network, the implementation of which is subject to both sides observing the behavioural 'rules of the game'. I should not like to rest the future funding of a Welsh assembly on a system that was merely the behavioural 'rules of the game being observed by all the parties. Therefore, I agree that, whatever the Barnett formula's other imperfections, it should be given a statutory base. I should not like to rest the assembly's funding on that weasel-worded description of the Barnett formula. It is important to give the formula better standing and status than it apparently has in the Treasury's eyes. That is my first point. Secondly, from what have I read of the origins of the formula—I do not want to go over the exchange between my right hon. Friend the Member for Llanelli and my hon. Friend the Member for Cardiff, West (Mr. Morgan)—Joel Barnett rather denied that it was purely devolution-driven and argued that it was a more convenient way of negotiating these matters for the nations within the United Kingdom. Joel Barnett argued—I put the point to my right hon. Friend the Secretary of State—that the strength of the formula was the fact that it avoided an annual negotiation on a territorial basis. If that is the case, presumably the future Secretary of State for Wales will have no negotiation to conduct. If we had the Barnett formula, at least we would know that that was a basis and that, whatever happened, the Secretary of State for Wales's negotiating position would not be a main determining factor. Is not that the case, and is it not a possible case for giving greater status to the Barnett formula, to avoid annual negotiations by the Secretary of State to obtain money for the Welsh assembly? Treasury officials said that that was the value and purpose of the formula.

Gareth Thomas (Labour, Clwyd West)

Does my hon. Friend accept that enshrining the Barnett formula, with all its imperfections, in legislation will serve as a disincentive to the type of needs-based re-assessment that we all need in Wales?

Ted Rowlands (Labour, Merthyr Tydfil and Rhymney)

I do not think so, because everyone accepts that the Barnett formula—as the report says—does not take into account or reflect spending needs. It never did. The Barnett formula is a formula for calculating the block expenditure, based on the annual changes in the English departmental programmes. That is one weakness of the scheme—that the future funding of the Welsh assembly will depend on the changes of English departmental spending, as will funding for Scotland—but the formula is the only one that we have at the moment and, until we get a proper needs-based assessment, we had better put up with it. Anyone who has studied the effort that was made in 1978-79 knows—this is why amendment No. 18 probably is not realisable—that it will take quite a long time to determine and organise the needs-based redistribution of such money. Therefore, I think that we had better hang on to what we have. I do not say that because I believe the formula to be perfect, and I do not agree with my hon. Friend the Member for Clwyd, West (Mr. Thomas) that, if we hang on to it, it will stop Whitehall thinking about needs-based arrangements. I have some questions for my right hon. Friend the Secretary of State. First, I want to probe him on what will be included in the funding from the Secretary of State. The Barnett formula does not take account of some things; for example, in-year changes of expenditure are not subject to the formula. I understand that if, during a financial year, the Government run into some bother and have to cut public expenditure, those cuts in public expenditure in the English Departments concerned do not trigger the Barnett formula. The Barnett formula does not cover in-year changes of expenditure one way or the other. Alternatively, if, for some reason, expenditure is drawn down on the contingency reserve fund, that is not included in the Barnett formula. When the Minister replies, will he tell me how such situations will be dealt with in an assembly-Westminster-Whitehall relationship? If, for example—and it will happen to Governments in future—there is a bit of a spending crisis and a Budget is introduced, or an expenditure cut is ordered within the financial year, changing the basis of the funding, how will that be reflected in the Welsh assembly's funding? We need an explanation because that, as I understand it, is not covered by the Barnett formula. Similarly, if changes take place in the opposite direction—if extra spending takes place for a situation that has arisen—that is not, within the year, covered by the Barnett formula. In such circumstances, how would the funding of the Welsh assembly be influenced by such changes? My second question to my right hon. Friend the Secretary of State is as follows. One talks about Welsh block expenditure as being £7 billion. Not all that amount is covered by the Barnett formula, as such. There is about £250 million worth in the Secretary of State's budget relating to agricultural spending of one kind or another. What will be the position of that £250 million—not a meagre sum, although a large proportion of it, £200 million, consists of EU receipts from the common agricultural policy? There is expenditure outside the Barnett formula, in the Secretary of State's £7 billion block budget, which is not dealt with in the same way as the expenditure determining the block expenditure of the other 96 per cent. What happens to the £250 million at present in my right hon. Friend's £7 billion budget, which is not covered by the same rules? Where will that money go? How will it be accounted for? How much will stay with the Secretary of State, how much will go down to the Welsh assembly, and how much will go back to other Whitehall Departments? I should be grateful if my right hon. Friend would explain. That touches on a point that has been mentioned over and over again, and sooner or later we will have to come to terms with it. What reserve powers will the Secretary of State have? What budget will he have, after the assembly has been established? Serious issues are involved. Thirdly, the clause deals with the amount that the Secretary of State will hand over to the Welsh assembly. He has said repeatedly that the assembly's running costs of £15 to £20 million will be covered by the savings that he intends to make in the quangos even before the assembly is established. How far are we down that route of savings to offset the cost of running the assembly? Those are questions thrown up by the argument. I return to the point made by my right hon. Friend the Member for Llanelli. We need some kind of formula enshrined in legislation or in a concordat that will have some power or force to it. The Barnett formula is the best that we have at present. As my hon. Friend the Member for Clwyd, West suggested in his intervention, it is not perfect by any means. For example, our gross domestic product is 18 per cent. lower than England's, our household disposable income is 11 per cent. lower, our personal income is 17 per cent. lower, and our average earnings are 17 per cent. below those of England. Two conclusions emerge from those astonishing figures: we need at least the Barnett formula, but we will need Barnett-plus to ensure the effective financing of the Welsh assembly. As my right hon. Friend argued, we cannot cut the umbilical cord of redistribution of resources in the United Kingdom at present. With the Welsh economy in its present state, this is not the time to do such a thing. It is vital that that umbilical cord is not cut. The pressures for redistribution that continue in the United Kingdom should not be taken off, because by any objective analysis we shall need more, sadly, not less, in the short to medium term.

Dafydd Wigley (Plaid Cymru, Caernarfon)

I shall speak to amendment No. 435, and amendment No. 438 which is grouped with it. Before I go into the substance of our amendment, which picks up some of the themes that hon. Members have been running on, I want to dispute the myth that is continually perpetuated, that poor little Wales will never be able to afford anything and must depend for ever and a day on an umbilical cord to somebody or other, and that we can never stand on our own two feet and do anything for ourselves. Figures have been generated by the Welsh Office over the years—especially during the 18 years of Tory rule—to justify the amount of money that was going by the formula to Wales to sustain public expenditure. Yes, on certain expenditure headings, Wales has a greater per capita expenditure, but on others that are not in the block, we have significantly less. About 1 per cent. of the expenditure on the defence of the realm comes through into the economy of Wales. There was a series of theoretical errors in the paper produced by the Welsh Office during the Conservative regime—taking into London the money that came from Brussels on account of the Welsh economy, for example; and taking in the tax that is paid for civil servants who are based in London as an income into the UK, rather than crediting it to a Welsh account. The paper was totally flawed. We must approach the question from the reality that we know in Wales now, not on the basis of spurious figures generated for a political purpose. The reality is, however, that the income per head in Wales has dropped from about 92 per cent. of the UK average 20 to 25 years ago, to 83 per cent. now. That is the result of the 18 years of government that we had, our dependence on the Barnett formula and the assumptions from which it was projected. That is what is basically wrong. There is room to challenge the Barnett formula. I note with interest that Lord Barnett himself recognises that it is time to look at the matter again, because Wales is not doing well enough out of the formula. Over those 18 years, because the Barnett formula existed, it was taken as a fig leaf to justify the levels of public expenditure in Wales, when the economy in Wales, with the problems that we had with the run-down of the coal industry and the steel industry, and the problems in the rural areas, justified a significantly greater injection of money there. Had there been that injection, the economy would by now have been much stronger than it is. Mention was made earlier of the fact that countries cannot balance their books. There is one country that is balancing its books—the Irish Republic—no doubt because of the munificence of the English taxpayer, who has paid money to Brussels [Interruption.] It makes me sick—the way that Tory Members sneer at the efforts that Ireland has made to pick itself up by its bootstraps. They denigrate Ireland at every opportunity. Now that Ireland has succeeded in getting its GDP per head not only higher than Wales but higher than the UK, they want to say, "Ah, but it is our money that has done it." It is high time that people in the Tory party paid tribute to Ireland for what it has done, rather than trying to draw it back time after time.

Richard Shepherd (Conservative, Aldridge-Brownhills)

Will the right hon. Gentleman give way?

Dafydd Wigley (Plaid Cymru, Caernarfon)

To come back to Wales—[HON. MEMBERS: "Give way."] I know that hon. Members in the imperial party do not like this, because it is always their game to run down Ireland, to sneer at Ireland and, whenever possible, to have wars with Ireland. That is partly why we have the problems that we have now. If they go to Dublin—

Richard Shepherd (Conservative, Aldridge-Brownhills)

On a point of order, Mr. Martin. Is it in order for an hon. Member to make aspersions and judgments on the internal process of another man's thoughts, without giving way?

Michael Martin (Deputy Speaker, Glasgow Springburn)

What I can say at this point is that it would be in order to speak to the amendment.

Dafydd Wigley (Plaid Cymru, Caernarfon)

I am, perhaps, too easily tempted to go down that road when I hear attacks on Ireland.

Richard Shepherd (Conservative, Aldridge-Brownhills)

Will the right hon. Gentleman give way?

Dafydd Wigley (Plaid Cymru, Caernarfon)

Out of kindness, yes.,

Richard Shepherd (Conservative, Aldridge-Brownhills)

The essence of the amendment and of the right hon. Gentleman's argument was the size of transfer payments. No one was making a critical judgment one way or the other. The fact is that the Irish Republic has had huge transfer payments, as much as 5 to 6 per cent. of GDP in recent years. The point arising from some of the arguments on the amendments was that Wales similarly receives large transfer payments.

Dafydd Wigley (Plaid Cymru, Caernarfon)

The point that is material to the argument is the success that the Irish Republic has had in generating its economy to the point that the GDP per head of Ireland is higher than the GDP per head of the UK. Even if one takes out the current transfer payment from Brussels to Ireland, it is still higher. That is because over the years the Irish Republic succeeded in using those transfer payments to build up the economy. That brings us back to the core of the argument, as advanced by the right hon. Member for Devizes (Mr. Ancram) and earlier participants. Over the period from 1978, when the Barnett formula came in, to the present time, when we have seen the GDP per head of Wales go down, we did not have the transfer payments that were necessary to meet the economic circumstances of Wales at that time, because the Barnett formula does not do that. It increases or decreases in line with the changes in England, where circumstances were entirely different. Because of that reliance on the Barnett formula, there was no attempt to address the stark reality of the Welsh economy that has seen incomes per head drop to a tragically low level in many parts of Wales, where there is rank poverty and deprivation. The Barnett formula has not begun to address those problems because the base situation is inadequate. Working within a United Kingdom framework—although Plaid Cymru is more than happy to see Wales become a self-governing country making its own way in the world—any payments that are made to the National Assembly for Wales should have regard to objective criteria. That is where I return to the comments of the right hon. Member for Devizes. Our amendment spells out what those objective criteria should be, and I commend them to hon. Members. First, we believe that there should be a reference to the disparity in GDP per head between Wales and the United Kingdom.

Alan Williams (Labour, Carmarthen East and Dinefwr)

Does the right hon. Gentleman concede that the criteria that would work well for Wales—we are poorer, so the Barnett formula should give us more—would penalise Scotland, where GDP is about the same as in England, very heavily?

Dafydd Wigley (Plaid Cymru, Caernarfon)

I am certain that our Scottish friends are capable of looking after themselves. In the context of this Bill, we shall look after Wales as best we can. I believe that the question of GDP per head in Wales and the disparity compared with England, which has widened over time, should be addressed. The disparity within Wales is even more significant. There is desperate poverty in parts of Wales, such as the old slate quarrying and coal mining areas of Gwent and particularly Glamorgan. There must be equalisation the like of which we have not seen in the past 18 years under the formulae that have applied. GDP is not the only factor—there are other indices of deprivation, such as health and morbidity figures, housing and unemployment. There are many large pockets of youth unemployment in our country. We believe that sparsity of population is another factor that must be taken into account, as the hon. Member for Brecon and Radnorshire (Mr. Livsey) said in opening the debate. We should bring some objective criteria into play. If we are to discuss the matter logically, we must consider the base and not merely the adjustment mechanism.

Dafydd Wigley (Plaid Cymru, Caernarfon)

Yes, but I would not introduce it into the Barnett formula. As defined and described, the Barnett formula is related to yearly changes. That is another characteristic of the formula that fills me with hesitation. If we are moving to an era—heaven forbid—when parties compete with each other to cut public expenditure, in terms of social security or in other directions, applying the Barnett formula could lead to a greater reduction in Wales than in the United Kingdom. That would cause problems.

Denzil Davies (Labour, Llanelli)

rose—

Dafydd Wigley (Plaid Cymru, Caernarfon)

I am drawing my remarks to a close. For both those reasons—the size of the base and the appropriateness of the adjustment mechanism—we believe that amendment No. 435 provides a safeguard and should be built into the Bill. I ask the Minister to respond to that point.

John Marek (Labour, Wrexham)

I agreed with almost every word of the speech tonight by the right hon. Member for Devizes (Mr. Ancram)—not the first time in 15 years, but it happens rarely. We must recognise that he made a sensible contribution on behalf of the Opposition. Rather than trying to denigrate and wreck the Bill, the right hon. Gentleman pointed out that the formula as expressed in clauses 80 and 81 is not quite right. He said that we should do a little more to ensure some clarity and avoid problems in the future when the national assembly is up and running. I think that that is true. I think that most hon. Members who have spoken in the Committee believe that clauses 80 and 81 are all right; they will do. The national assembly will be established and it will be able to operate. However, the situation could be improved. My hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) expressed the view that is probably nearest to my own when he said we need Barnett plus. We could probably make do with Barnett for the first five, 10 or 15 years, but it is clear that we will need a little more than clause 80 provides at present.

Denzil Davies (Labour, Llanelli)

Amendment No. 369 refers to "no less than" the amount produced by the application of the Barnett formula. Therefore, it allows room for that kind of variation.

John Marek (Labour, Wrexham)

I am grateful to my right hon. Friend for making that point. I cannot support the Conservative amendment, which is a probing amendment; if the Opposition seek to divide the House, I shall not vote for that amendment. However, hon. Members have recognised that there is a problem, and we must consider it carefully. The right hon. Member for Devizes asked how the money would be transferred from the Treasury to the national assembly. There is no Welsh consolidated fund, although there will be provision for such a fund in the Scottish legislation. The Minister should consider that point. He may have argued for a Welsh consolidated fund and have been bound hand and foot by Treasury solicitors saying, "You cannot have a Welsh consolidated fund or anything like it." I do not know. However, I will be interested to hear the Minister's comments about that. A Welsh consolidated fund—comprising money from the Treasury upon which the assembly could call at will—would assist me and other hon. Members who worry about how money will be transferred from the Treasury to the assembly.

Ted Rowlands (Labour, Merthyr Tydfil and Rhymney)

From memory, I think that a Welsh consolidated fund was written into the earlier devolution legislation.

John Marek (Labour, Wrexham)

My hon. Friend is quite right. Why is there no consolidated fund for Wales when there is one for Scotland? Clause 80 states: 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 can imagine a Secretary of State who is not on friendly terms with the national assembly leadership withholding its money. In such circumstances, the First Secretary of the national assembly would be forced to telephone from Cardiff, Swansea or Wrexham every morning to ask, "Have you put the cheque in the post, because we want to sign a contract or provide funding for a hospital or school? Is the cheque on its way?" Will the money be provided in the form of a banker's draft? Will the assembly have to wait until a cheque has cleared? That is not satisfactory. To the extent that I perceive a conversion in the Opposition's view regarding the Welsh assembly, I am less concerned that things will go badly wrong if there are different ruling parties in Westminster and in the assembly. Even so, we are talking about primary legislation and we should address that point. I ask the Minister: why is there no Welsh consolidated fund to help this process? If there will be no such fund, will the Government introduce an amendment—perhaps in another place—that will make it clear that adequate moneys will be transferred in good time and in sufficient quantities from the Treasury or the Secretary of State for Wales to the national assembly in order to avoid any cash flow problems? Most hon. Members would agree with the application of the Barnett formula if clauses 80 and 81 contained a little more substance. I think that that is the general view—and it is probably also the view of Ministers. I wonder whether we can do something about that, although we clearly do not want to see formulae in primary legislation. I agree with the right hon. Member for Devizes about that. It would be better to have a needs-based formula than a Barnett formula. I think that we would all agree on that. I am not under any illusion that that could be done in one or two weeks or a month, or before the latest time for the tabling of amendments in another place. But could they table a proposal to amend primary legislation so as to commit the Secretary of State for Wales to abide by certain criteria when determining the sum that is to be transferred to the national assembly? At present, the Bill contains no such provision. It merely refers to the Secretary of State providing such amounts as he may determine. There is no reference to the Secretary of State providing according to needs, to the Barnett formula or to anything else. 6 pm We have the Judicial Committee of the Privy Council to resolve disputes. Perhaps we could use it to settle any dispute over whether any criteria have or have not been followed sufficiently by the Secretary of State for Wales in determining how much money he should transfer. From the point of co-operation, we need something. I have no intention of supporting the amendments tabled by Members of the Liberal Democrats or of Plaid Cymru. I shall definitely not be supporting the Conservative amendment, although I agree with what the right hon. Member for Devizes said. However, if the Government would at least consider the points that have been raised by many right hon. and hon. Members this afternoon, we should be making progress. Our debates on this Bill have been unusually co-operative and forward-looking and in this instance, we deserve a response from the Government.

Richard Shepherd (Conservative, Aldridge-Brownhills)

I shall speak briefly because we are under enormous time constraints. Secondly, I shall take up a point raised by the right hon. Member for Llanelli (Mr. Davies).

Denzil Davies (Labour, Llanelli)

Pronunciation?

Richard Shepherd (Conservative, Aldridge-Brownhills)

The right hon. Gentleman must forgive me; I am an alien. He is right not to trust the non-Welsh on these matters. The right hon. Gentleman makes the point that as we come to the end of the unitary state as we have known it, the transfer payments within what was the unitary state will come under more open discussion. We have only to listen to the hopes and aspirations of the Liberal Democrats and the Welsh secessionist party, with their Prime Ministers, Cabinets, research assistants and the huge paraphernalia of additional expenditure that will be given to a political class for Wales, to reflect on the wisdom of the Welsh people—or 75 per cent. of them—in refusing to support the Government's proposals. I merely note that 75 per cent. must have heard the speeches of the right hon. Member for Llanelli over many years, in which he has highlighted the real difficulties where there is a poorer region within our island and the transfer of payments to it. Most of us who believe in Britain believe profoundly in the principle of transfer payments. We see ourselves as equal citizens in a commonwealth. Each British citizen contributes through tax and financial arrangements to the benefit of the whole. However, we hear words such as "assumption" and "grabbing" used across the Chamber in relation to the Welsh people. The Government's case was, of course, predicated on the Welsh electorate, not the Welsh people. Half a million Welsh people live within the confines of England. A huge proportion of the Welsh electorate is excluded from discussion of these matters. Family, love and community mean that we, the melting pot in England, with Welsh Members elected as English representatives, have a fundamental interest in ensuring the well-being of each part of the Union. We have heard the prattling, if I may so, of the Welsh secessionist party, which appears to think that Wales is a fiscally self-contained unit and could launch itself on the international stage, maintaining the standards of living and the aspirations of most of Britain on its own economic base, for which it condemns 18 years of Thatcherism or Conservative government? The rigamarole goes on through each debate, but in this instance we are talking about a matter of substance. We are one small island in the world. We are intermingled by blood and common language. The nonsense that I so often hear is expressed as a form of irritation by many in Wales, who say that they are corralled in Welsh-speaking schools when their heritage for more than a millennium has been integration with England. Indeed, when we divide the Union and talk about it, England and Wales is the unit on which we reflect; that has been the position for most of us for most of our lives. The secessionists now see that unit as an inconvenient association. They now postulate to the Welsh people that without funding from across Britain—Welsh, Scottish and English taxpayers as well—it would float off into some glorious financial future as a free-standing independent nation, separate from the other nations of this commonwealth of Britain. That has been the tone and temper of our debates as they have developed on these most delicate subjects. I genuinely think that that is why Wales has been so cautious about going for the route proposed by the Government. I genuinely think that. That is no criticism of the Government. I think that they were fixing a political fix in the Welsh Labour party. Wales got what it wanted, and that was a Labour Government. That was the substance of it all. We are now hearing demands and interpretations of matters within the remit of the White Paper that are far beyond anything to which the Government have committed themselves. As a result, caution is urged by English elected representatives. I say that because my neighbouring constituency Member is the hon. Member for Walsall, South (Mr. George), who is Welsh born. The hon. Gentleman is proud of his associations with Wales. Divisiveness is introduced by those who think that they are mounting a separate state within the Union of Britain while at the same time expecting others to fund their ambitions.

Dafydd Wigley (Plaid Cymru, Caernarfon)

Will the hon. Gentleman give way?

Richard Shepherd (Conservative, Aldridge-Brownhills)

No. I have finished.

Gareth Thomas (Labour, Clwyd West)

I well understand the thrust of the arguments that have been presented to us so forcefully by my right hon. Friend the Member for Llanelli (Mr. Davies). My right hon. Friend believes that, in the new era of devolved government, Wales needs an insurance policy. He thinks that it should have reassurance that it will not be worse off than it is now. As I understand it, that is the basis of my right hon. Friend's amendment. Perhaps my right hon. Friend takes the view that I have outlined because, having had the benefit of long experience in Parliament, his estimation of human behaviour may be rather more pessimistic than mine. On any level, however, I believe that there are fallacies in his argument. Why should a more transparent and devolved system of government preclude a genuine debate on what the various regions of the United Kingdom require to produce equalisation and parity in terms of prosperity? That sort of debate is common elsewhere in Europe. I know that my right hon. Friend is antipathetic towards the concept of Europe, as are various Opposition Members. However, there exists a system for regional transfers within Europe that is entirely consistent with the concept of member states—let alone the modest form of regional government that we propose. There is an open debate in Europe about which regions within Europe should receive transfers. We expect that there will be a healthy debate in Wales about the structural funds for which Wales will be eligible under the Agenda 2000 proposals. These funds should most certainly be based on gross domestic product and should reflect the fact that Wales is far less prosperous than other regions of the United Kingdom. I do not agree with my right hon. Friend the Member for Llanelli, with respect, because I believe that we need a healthy and open debate that takes on board an assessment of real needs. As I am sure my right hon. Friend knows, I shall refer to five issues that show that there is a need to reconsider the present formula, non-statutory though it is, for the redistribution of resources. He says that he cannot trust the English, in perhaps somewhat intemperate language, although I understand the spirit with which it was stated: that, if we do not enshrine the formula in legislation we will be far worse off. But if the formula is enshrined in legislation, I do not trust this Parliament to be prepared to improve the present situation and to embark on a genuine open debate as to what the regions and nations of the United Kingdom require. If the formula is enshrined, it may be the minimum, within which we shall be trapped. Wales has the lowest gross domestic product per head of any region in the United Kingdom. It also has the lowest level of personal disposable income of any region in the United Kingdom. The level of economic activity in Wales is very low. I am speaking specifically of my constituency, where economic activity and prosperity are among the lowest in the United Kingdom. Economic activity in Wales is above only that of Merseyside and the north-east of England. Average earnings in Wales are the second lowest in Britain, and are above only those of the north-east of England. Wales has the highest proportion of the population in the United Kingdom reporting long-term illness. Those facts serve to underline the point that the Barnett formula, based as it is on the historical, somewhat unscientific, inherited baseline, does not really address the objective criteria of relative deprivation. I see strength in the Plaid Cymru amendment, which would import objective criteria into the assessment of budgetary transfers in the United Kingdom, but I suspect that it will be unworkable. What is needed is an open and transparent debate. Britain will continue to exist. Many Labour Members accept that the United Kingdom consists of various nations, and are proud to be Members of the British Parliament, which will, of course, continue and retain sovereignty.

Rhodri Morgan (Labour, Cardiff West)

I am grateful to you, Mr. Martin, for allowing me to participate in the debate. I shall make some observations on the Barnett formula and whether it could be improved on, and whether it can be caused to survive or be strengthened, so that there is a guarantee that it will continue beyond the process of democratic devolution—in so far as we can overcome the absence of a written constitution and the fundamental principle of this Parliament that we have never found a mechanism to bind our successors. I do not agree with everything that my right hon. Friend the Member for Llanelli (Mr. Davies) said, and I certainly do not agree with a great deal that the hon. Member for Aldridge-Brownhills (Mr. Shepherd) said. There has been a general call from both sides of the Committee that we should try to find a way of causing the Barnett formula, or another resource transfer mechanism based on objective criteria of relative need, to be written into the Bill, and that there should be another means of the Government declaring that they will produce a resource transfer mechanism, which is undoubtedly one of the fundamental features that can make or break successful devolution, before all the Parliamentary proceedings are over, so that, whatever the disputes resolution mechanism, it is there for guidance—for judges in judicial review cases, or whatever it is needed for. If they do that, we will have had the firmest possible declaration from Ministers about how they propose that the resource transfer mechanism will operate in future. It is precisely because of devolution that the Barnett formula, and its predecessor, the Goschen formula, came into existence, not despite devolution, as my right hon. Friend and the hon. Gentleman seemed to argue: that a further act of devolution is a threat to the Barnett formula. That is a totally unhistoric view. The Barnett formula came into existence because of the expectation of devolution. Some have said, "You cannot prove that," and, of course, it cannot be proven, because the formula is somewhat shrouded in mystery. The right hon. Member for Devizes (Mr. Ancram) said that the formula emerged only two years after it had been agreed between the Government Departments. He is right. Trying to get back to the origins of the formula and to see a document that clearly states it is difficult. It is like one of those theorems. As has been said of other formulae, trying to find out who understands the Barnett formula is difficult. Only three people understand it: one is mad, one is dead and the other one is an academic who, unfortunately, is on a sabbatical bicycling across the Gobi desert. 6.15 pm There is an element of truth about that. The formula is open to dispute. However, it is certainly true that, fortunately, the academic in this case, Professor David Heald of Aberdeen university, is not on sabbatical bicycling across the Gobi desert, but quite recently gave evidence to the Treasury Committee. Appearing before the Select Committee might be far worse than bicycling across the Gobi desert, but he was there. As far as I am aware, he is the only academic to have taken much interest in the Barnett formula. I quote briefly what he said about it: With a view to regularising the financial relationship between the UK Exchequer and the proposed Scottish Assembly, the Labour Government in 1978 established a formula which linked changes in 'Scottish block expenditure' to changes in 'public expenditure in England on those services within the Scottish block'. There are not many academics with an interest in this subject, and I take that as a fairly definitive statement from the only academic who is interested. Lord Barnett differed slightly from that view when asked about this in the Treasury Committee, but he was asked the wrong question. He was not asked: "Was it because of devolution?" but "Was it because of devolution and the rise of Welsh and Scottish nationalism?" He said that that was part of the picture, but that there were other reasons. There were, of course, reasons other than resource transfer. These related to devolution, but were not to do with resource transfer. One of those issues was raised by my hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands)—to avoid the annual punch-up. That was the basis of the Goschen formula, which was brought in shortly after the Secretary of State for Scotland and the Scottish Office were introduced in 1885. The Goschen formula was developed by the Liberal Government at the time to avoid annual punch-ups involving the Scottish Office and the Secretary of State for Scotland. Devolution causes formulae to be brought in. It is not a threat to the formulae. So long as we can agree on all that, we might be able to agree on the strongest formula that we can devise, given the absence of a written constitution and our inability to bind our successors. I hope that Ministers will be able to deal with that. The other issue that the Barnett formula enshrined was delegation within the block. The Treasury ceased to control the expenditure of the Secretaries of State for Scotland and Wales, and a year later the Secretary of State for Northern Ireland. They could spend the money any way that they chose within the block that had been agreed. If they wanted to have a big year on roads and a lower year on health, or if they wanted to do the reverse, they did not have to justify it to the Treasury. That was in expectation of devolution. It is clearly inconceivable to have Treasury control over individual items of expenditure if there is democratic devolution. They were freeing up the Treasury control mechanisms on individual items of expenditure. Those are the three principles of the Barnett formula. First, it enshrined higher expenditure per head in the block by fixing the baseline and tying the changes to an agreed formula. Secondly, it avoided the annual punch-ups by that means. That is why it has lasted for so long. Thirdly, there was no Treasury control over individual expenditure decisions within the block. My right hon. Friend also made the point that Wales is a poor country. We all know that. There is no question about that. Therefore a resource transfer mechanism is critical. We must remember that public expenditure comes in three categories. There is the Welsh block—what the Secretary of State for Wales spends. There is a little outside the block, but by and large we are talking about expenditure on health, education, roads and highways, and most agricultural expenditure. Then there is the critical area mentioned by my right hon. Friend the Member for Llanelli: social security, which has nothing to do with the Secretary of State for Wales. Another item is included in the resource transfer calculations relating to how dependent Wales is on the English taxpayer. Because Wales is a big retirement area, a large proportion of pensioners live there, and, relative to the population as a whole, a large proportion depend on benefits. That is an inheritance from our history of heavy industry: the right hon. Member for Caernarfon (Mr. Wigley) mentioned slate quarrying and coal mining. Defence procurement is said to be completely outside the area of identifiable regional defence expenditure. We have only 1 per cent. of defence procurement relative to 5 per cent. of the population, which is a loss—if we want to call it a loss—of some £400 million in annual payments towards wages that would be earned in Wales if we had the same share of defence procurement as we have of population. Obviously, that means that there are many fewer well-paid jobs in Wales than there would be otherwise, but defence procurement cannot be distributed region by region or nation by nation in the United Kingdom. In a sense, defence procurement is the regional policy of areas with a large number of defence establishments. It is, for instance, the regional policy of the Preston area, which is near the constituency of the hon. Member for Ribble Valley (Mr. Evans), an Opposition spokesman. There is the question of the vast taxpayer funding for British Aerospace—

Ted Rowlands (Labour, Merthyr Tydfil and Rhymney)

It was the Neville Chamberlain Government.

Rhodri Morgan (Labour, Cardiff West)

There are greater experts than me in the Chamber, so we will not go into the issue now. I hope that Ministers will take on board what has been said by hon. Members in all parties. We have asked for the solidest possible enshrining in legislation or in declaration that would be proof against judicial review, and would help the Welsh assembly. We want something that will say, "There shall be a resource transfer mechanism"—a mechanism that will be based on the Barnett formula, or on something better and more lasting. It will strike people as odd, when they look at regional devolution measures throughout Europe, that the Bill makes no reference to the need for and provision of a resource transfer mechanism.

Martin Caton (Labour, Gower)

For the time being, I too support maintenance of the Barnett formula as a mechanism for ensuring that Wales receives its fair share when Budget changes occur. That formula, however, just ensures that Wales receives any increase due to it on the basis of proportion of population, as was made clear earlier. That is why the formula could not prevent Wales from falling further behind England in terms of gross national product per head between 1976 and last year—and that is why I am attracted to amendment No. 435. The amendment, tabled by Plaid Cymru, tries to address need in Wales as compared to other parts of Britain. I agree with the intention of the amendment, which is to establish objective indicators that can identify and realistically compare need. GDP, relative deprivation and sparsity are certainly factors that need to be included if we are serious about establishing a new needs-based formula. Apart from GDP per head, however, in terms of any comparators for economic activity—unemployment, the proportion of people out of work and not seeking work, youth unemployment, household disposable income or average earnings—Wales is markedly worse off than England in regard to wealth and the ability to create it. How would we measure relative deprivation? Would we relate it to age and condition of housing stock? Wales has almost twice as many unfit homes as England, in percentage terms, and far more old homes. Rates of homelessness are also higher in Wales. As for health, the picture in Wales—as compared to England—is even bleaker. Wales has more long-term health problems; a much higher proportion of people receive sickness, invalidity or disablement benefit; there are higher death rates from heart disease; there are more cancer registrations; and there are longer waits for hospital treatment. What does sparsity mean in real terms for real people? It means smaller primary schools—although, ironically, classes are frequently larger. It means twice the road length to maintain per head of population compared with England. It means that public transport—although even more vital—is often very expensive for both the individual and the public purse. I am not convinced that amendment No. 435 adequately provides the framework for a new needs assessment formula, or whether it should be part of the Bill. If, however—as hon. Members on both sides of the Committee have said—there is a growing belief that spending in Wales, as compared to spending in the United Kingdom as a whole, should be reviewed, we must find a way of analysing comparative need objectively. I am convinced, on the basis of my experience and observation in my constituency and elsewhere as well as on the basis of statistics, that any fair review would result in an acknowledgement of the need to increase Wales's share of the cake rather than cutting it.

Peter Hain (Labour, Neath)

I agree with the right hon. Member for Devizes (Mr. Ancram)—which will worry him—that the debate has been crucial. I am disappointed that the hon. Member for Aldridge-Brownhills (Mr. Shepherd), who makes a valuable contribution to our debates, treated us to a rant rather than the intelligent speech that we have come to expect from him. I note that last night the hon. Gentleman voted for the proposition that there should be a Prime Minister of Wales; I am not sure how that squares with what he said this evening. I particularly enjoyed the speech of my right hon. Friend the Member for Llanelli (Mr. Davies), which was typically witty and erudite. He does not trust the English—I assume because English clubs have been nicking all the best Llanelli players. I apologise if my speech takes a little longer than ministerial speeches of this kind normally do, but many important points have been raised. First, let me deal with what my right hon. Friend the Member for Llanelli said about amendment No. 371, which deals with a slightly different aspect of the assembly's funding. The amendment would have the undesired effect of preventing the assembly from receiving money that Ministers or Departments have received from sources other than Parliament, which happens now in regard to some European money that the European Commission pays to a Department which, in turn, pays it to the Welsh Office. One instance is the European social fund, which comes via the Department for Education and Employment. I am glad that my right hon. Friend has tabled only a probing amendment, as amendment No. 371 would stop such arrangement from continuing. My hon. Friend the Member for Wrexham (Dr. Marek) referred to the consolidated fund. The existing parliamentary arrangements would oblige the Treasury to release the amounts voted by Parliament from a consolidated fund to the Secretary of State for Wales. I cannot imagine any circumstances in which a Westminster Executive would seek to defy the sovereignty of Parliament and abandon those arrangements. My hon. Friend mentioned Scotland. Scotland is different: it has its own consolidated fund because revenues from any income tax levied there will go into it. I should add, however, that the Scottish consolidated fund will not protect the concerns raised by my hon. Friend, because it will still be largely dependent on payments into it by the Secretary of State for Scotland. The Government's White Paper "A Voice for Wales" committed us to retaining the present arrangements for deciding the size of the block that is allocated to Wales. That means linking changes to the Welsh block to changes in Government spending on comparable English programmes. The Barnett formula, as it has come to be known, has operated in Wales and Scotland for many years and it has clearly achieved some acceptance. No obvious replacement of it would be fairer.

John Marek (Labour, Wrexham)

My hon. Friend has gone on to another section of his speech. I thought that I should wait until he finished his point before I intervened. What assurance can he give the Committee that any money voted by Parliament for the national assembly will be paid forthwith into the bank for the national assembly?

Peter Hain (Labour, Neath)

I realise that my hon. Friend is concerned about cheques being delayed in the post and so on, but I am sure that any Parliament will want to ensure that its relationship with the assembly is stable, honest and open, and that the procedures allow for that. The Barnett formula is clear and easy to understand. It does not give Wales a disproportionate increase—it is purely a mechanical exercise that is based on relative populations. Criticism of Barnett often arises because of confusion between the absolute size of the block and the mechanism for adjustments. The right hon. Member for Devizes quoted somewhat selectively, although accurately, from the Select Committee's report. It did not really challenge the case for Barnett. If the Government decide on a needs assessment, I am confident that Wales will not suffer. That point was made well by my hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands), who I understand is to star in a "Panorama" programme that examines precisely the problems in his constituency that are a legacy of 18 years of Conservative rule. That is the background against which we are discussing this matter. My hon. Friend the Member for Merthyr Tydfil and Rhymney raised in-year changes to the block. It is correct to say that such changes are not reflected through the Barnett formula, but there are exceptions and they are explained in the principles of the block budget for Wales, which were published by the Treasury in December. Paragraphs 10 and 11 describe circumstances in which access to the reserve can be obtained by the Secretary of State for Wales and of course subsequently by the Welsh assembly.

Ted Rowlands (Labour, Merthyr Tydfil and Rhymney)

If there were an expenditure review and an urgent cut in public expenditure in the year, how would that be translated into assembly spending?

Peter Hain (Labour, Neath)

A Labour Government are not going to make any proposals for such adjustments. In the event of a disaster or similar event, a claim on the block could be made. Under the principles and rules that were published in December by the Treasury, a claim on the reserve could be made. I agree with my hon. Friends the Members for Gower (Mr. Caton), for Cardiff, West (Mr. Morgan) and for Clwyd, West (Mr. Thomas) and with the right hon. Member for Caernarfon (Mr. Wigley) that Wales has higher needs. They are demonstrated by major economic indicators. The latest figures available show that Wales has the lowest gross domestic product in Great Britain; it is only 83.1 per cent. of the UK average—and it has fallen, by the way, in the past 10 years or so under a Conservative Government. Wales also has the lowest personal disposable income of any region in the UK—that, too, has fallen since 1979. Average earnings in Wales are the second lowest in Great Britain. They too have fallen proportionately since 1979. Economic inactivity in Wales is more than 4 per cent. higher than it is in England; for men of working age, the figure is more than 5 per cent. higher. Apart from those economic indicators, the need to spend more in Wales is reflected in the statistics on the health of the Welsh population, the poorer housing conditions and the lower educational achievements. It would not have been meaningful or practical to include the details of the formula and block rules in the Bill, as hon. Members have requested. As I have explained, the formula does not determine what the base line of the Welsh block is. I suspect that it would have been a novel use of primary legislation to specify that the Secretary of State should pay to the assembly no less than a particular sum of money. That would have flown in the face of the usual supply procedure by which Parliament approves the Government's requests for funds and authorises expenditure through the annual Appropriation Act. Inclusion of the formula in the Bill could not, therefore, have guaranteed that the assembly would receive a particular level of resources. In short, it would not have been meaningful. The practical objection to including the formula and the block rules in the Bill is that the formula and rules are complicated, detailed and subject to change, for reasons that I shall explain. There would either have to have been an order-making power to amend the formula and rules in the Bill or, more likely, acceptance from the outset that the formula and rules would appear only in subordinate legislation. Both the formula and the block rules are subject to regular revision. For example, the current rules will need to be amended to allow for the inclusion of forestry and domestic agriculture programmes in the Welsh block when they are transferred, as they will be, to the assembly. The Government have also announced that the population ratio that underpins the formula will be updated annually from 1999–2000 onwards. It would therefore not be possible to put the population share in legislation without the ability to amend the legislation annually. Nor does the formula tell the whole story of adjustments to the block. Increases or decreases can occur because of asset sales, changes in responsibilities or the imposition of new burdens, whether by the UK Government on the assembly and on its spending programmes or by the assembly on Government Departments.

Dafydd Wigley (Plaid Cymru, Caernarfon)

In case we do not have time otherwise, will the Minister clarify whether the assembly will be entitled to keep the revenue obtained by asset sales?

Peter Hain (Labour, Neath)

That depends on what the asset sale is. If it is a property owned by the assembly—an office block, say--there would be a case for that. If there were a privatisation in Wales—such as the privatisation of Welsh Water—the returns would go back to the Treasury. The assembly will not be responsible for all Government expenditure in Wales and some of the expenditure for which it will be responsible will continue to be outside the block arrangements, such as most Europe-funded agriculture expenditure—a point that was mentioned by my hon. Friend the Member for Merthyr Tydfil and Rhymney. Any reference to the Barnett formula in the Bill would mean that the whole system would need to be built into legislation. It may not be in the Bill, but the formula—this is an important point; it has not been lightly done—is referred to in the financial memorandum to the Bill, which again shows the Government's continuing commitment to retaining the present arrangements. However, it would not be meaningful or practical to include the details of the formula in the Bill itself. Changes to the Welsh block will continue to be determined by a formula, not by annual negotiations, as the amendments would require. I remind the Committee that the formula and block rules have operated for nearly two decades without being included in legislation. During that period, they have operated entirely satisfactorily in terms of their mechanical operation, even under a Conservative Government who were hostile to Wales—[Interruption.] The Conservative Government were indeed hostile to Wales, as any of my constituents would confirm, in terms of the repeated attacks and insults heaped on Wales and the denial of our democracy. To ensure that the formula and block rules are entirely open and subject to scrutiny, the Government, for the first time since the Barnett formula came into being—we deserve credit for this—published the principles that govern the block and formula arrangements on 8 December. I did not hear a chorus of criticism in the House when that document was published. We are committed to publishing the full rules in due course and any revisions to them. Any major changes to the block and formula rules will be carried out only after a full study of relevant spending needs. That would be the time to consider such factors as GDP, sparsity of population and relative deprivation. The National Assembly for Wales would be fully involved in any such study. My right hon. Friend the Member for Llanelli raised important points about concordats with the Treasury. There will indeed be a concordat between the assembly and the Treasury. It will cover, for example, the information to be exchanged between the assembly and Treasury. The Barnett formula and block rules will be published separately from any such concordat. The principles of the formula and the block rules were published in December, and we are committed to publishing the full block and formula rules and any significant changes to them.

Denzil Davies (Labour, Llanelli)

Is my hon. Friend saying that the Barnett formula principles will not be in the concordat—the agreement—between the assembly and the Treasury?

Peter Hain (Labour, Neath)

The Barnett formula principles have already been published. The rules will also be published and the financial arrangements between the assembly and the Treasury will be published in a concordat. The Government's view is that the determination of the Welsh block is best handled administratively, as it is now, but in a much more open and transparent fashion. Clause 81 obliges my right hon. Friend the Secretary of State to lay before the assembly a written statement of its estimated resources for each financial year. That will include details of how the total amounts have been calculated through the block and the formula system. That statement is the proper one in which to set out how the formula has been operated in any given year. I welcome the wish to ensure that Wales's needs for a proportionately higher share of UK resources continue to be recognised, but it would not be appropriate to insert that sentiment in the Bill. I hope that my full explanation will satisfy the Committee why it is inappropriate to include the Barnett formula in legislation. The new openness that we propose about the detail of the formula and its operation each year is a much better guarantee of a fair settlement, and Parliament and the assembly will, for the first time, be able to see exactly how the formula operates. That is a stronger and more efficient form of accountability than attempting to capture the procedures in primary legislation. Amendment No. 18 would involve unnecessary bureaucracy. It would strangle the assembly with bureaucracy—but perhaps that is not surprising because it is a Conservative amendment. It would require certificates to precede each payment by a Minister or Department. The overall position will be adequately set out in the statement for which clause 81 provides. The amendment is typical of the Opposition's churlish and niggling approach to the Bill. There is adequate protection in our proposed arrangements to secure the financial basis for the assembly's budget. I ask the hon. Member for Brecon and Radnorshire (Mr. Livsey) not to press his amendment to a vote, and I hope that the Committee will support the clause.

Richard Livsey (Liberal Democrat, Brecon and Radnorshire)

The debate has been wide-ranging, and many important principles have been enunciated in an effort to define how the assembly will be funded. Hon. Members have tended to focus on the Barnett formula, which has been operating for two decades. The right hon. Member for Llanelli (Mr. Davies) raised several important issues and said that much more money is coming in than is calculated by the Barnett formula because of social security and other payments. The resource transfer mechanism needs to be better defined in the Bill, and the amendments relate to the Barnett formula. As the right hon. Member for Devizes (Mr. Ancram) raised similar issues, there seems to be some agreement that the method of funding should be defined. There is no complacency in the Treasury. The Secretary of State has taken a great interest in trying to ensure adequate funding for the assembly. The hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) said that the Barnett formula was convenient because it avoided negotiations. That is a strong point. I understand the views of the right hon. Member for Caernarfon (Mr. Wigley) who tabled amendment No. 435 on the crucial issue of need. As hon. Members have said, Wales has many needs. It has low wages, a low gross domestic product, high unemployment and high social deprivation. I did not quite understand the rather intemperate speech made by the hon. Member for Aldridge-Brownhills (Mr. Shepherd). I am not a nationalist, but many members of my family lost the Welsh language because of discrimination. There are historical reasons for the majority of people in Wales no longer speaking the native tongue. Only about 20 per cent. of its people speak Welsh. 6.45 pm The hon. Member for Clwyd, West (Mr. Thomas) spoke about an insurance policy in relation to the Barnett formula advanced by the right hon. Member for Llanelli. We have certainly had a healthy and open debate on many matters. The hon. Member for Cardiff, West (Mr. Morgan) rightly said that there was a need for a defined formula. The debate has identified the many problems that arise from rural and urban deprivation in Wales and has shown the requirement for a definition of need. That has not been spelt out in the Bill. We have debated the complex issues. In some respects, the Barnett formula has stood Wales in good stead, but there has been a reduction in GDP. I was glad to hear the Minister say that the concordat will be different from the statement in the explanatory and financial memorandum, in that the Barnett formula will be acknowledged. He spoke about deprivation in Wales. The Bill must refer to the principles of resource transfer. If it is not acceptable to put the Barnett formula in the Bill, some kind of statement must be made about how to proceed. In the light of the full debate on it, I beg to ask leave to withdraw the amendment.

Robert Syms (Conservative, Poole)

I beg to move amendment No. 15, in page 38, line 32, at end insert— '(3) The Secretary of State shall receive representations and consult interested parties, including the Assembly, as to payments made under this section.'. The Secretary of State will continue to be accountable to Parliament, but he will become the paymaster of the assembly. That is made clear in the notes on clauses, which state that he will be free to determine the amount of such payments. His role will be as a conduit for resources and it is important to amend the Bill to make him more accountable to the people of Wales. The assembly will be one of the few examples of an elected body with no direct financial link with voters. Local authorities and even parish councils have some sort of financial link. The briefing paper in the Library states: Indeed Executive Devolution is unlikely to be stable or long lasting because it is so heavily dependent on co-operation between Cardiff and Westminster. We are not so sure about Cardiff. Those of us who love the Union wish to strengthen the arrangement by trying to get around the disadvantages of the arrangements in the Bill. Administrative devolution is an unusual creation and will require creative and imaginative suggestions—such as our amendment—to make it work. We therefore feel that incorporating amendment No. 15 would be an improvement. We feel also that it is not unreasonable that the assembly should be consulted on financial matters. Indeed, there is no reason why it should not be consulted. We can now clearly discern in the Bill the shape of the assembly. We cannot, however, discern the Secretary of State's role. Our amendment would ensure that the Secretary of State's future role is defined. As Secretaries of State, Members of the Assembly, hon. Members and Governments come and go, our amendment would provide a safeguard by establishing a formal consultative process so that people in Wales may feed their views back to Westminster through the Secretary of State. We believe also that the consultation process should include other bodies, such as trade unions and the Confederation of British Industry. A formal consultative procedure could be useful to the Secretary of State in establishing a financial background for those from Wales who provide advice and participate in consultation. We have heard that the Bill is not an event but a process and that further powers may be given. If we provide a consultative role for both the assembly and the people of Wales, there will be a useful check in ensuring that the assembly's and people's views are fed back, via the Secretary of State, to the House. We have heard much about accountability, inclusiveness and openness, yet clause 80 states nakedly the power of the Secretary of State. Although—to give credit to the Secretary of State—some of the proposals that we are debating are meant to reduce that power, our amendment would help to achieve that end. Creating a formal consultation process would help over a period of years to improve the role and relationship between the assembly and Westminster.

Peter Hain (Labour, Neath)

I congratulate the hon. Member for Poole (Mr. Syms) on his first appearance at the Dispatch Box. It was a very confident and pleasant performance.

Ron Davies (Labour, Caerphilly)

In contrast with the rest of the Opposition Front Bench.

Peter Hain (Labour, Neath)

I am far too nice to make such a point. I welcome the hon. Member for Poole to his new role. On amendment No. 15, I should first make it clear that the assembly will be free to make any representations on funding that it wishes to make to my right hon. Friend. Paragraph D.14 of the White Paper made it clear that that was our intention, and clause 34 gives the assembly the power to make representations on any matter affecting Wales. Nothing will prevent anyone who wishes to make representations from doing so. Therefore, amendment No. 15 is unnecessary for that purpose. The amendment attempts also to ensure that my right hon. Friend will consult the assembly about its funding. I give the Committee an absolute commitment that discussions about those matters will take place between the assembly and my right hon. Friend during each public expenditure survey—subject to the operation of the Barnett formula, which we discussed in the previous debate. We can be sure that the assembly will want to give the Secretary of State its views on the total level of resources that should be made available to it, any special factors that it wishes the Government to take into account in reaching their decision and its views on the detailed operation of the block formula. I expect a chorus of views from the assembly, through the Secretary of State, to the Cabinet. The assembly and the Secretary of State's office will also have to discuss technical matters, such as settling the schedule of instalments of payments made by the Secretary of State to the assembly. There is no need for legislation to spell out how those discussions should be held. Moreover, the amendment would risk creating a more formalised and costly process by adding further statutory requirements for a potentially wide consultation process with undefined "interested parties". I realise—undoubtedly I will be accused of being churlish for saying this—that the Tories need something to vote on today to justify their role as an Opposition, but amendment No. 15 should not be it. Behind the official Opposition's criticism of the Bill is an assumption that there will be massive conflict between the assembly and the Secretary of State—who the Opposition regard both as powerless and, conversely, as the powerful block to the assembly achieving its objectives. He cannot be both. The Government are engaged in creating a new democracy and a new pluralism in Britain's democracy. The nation of Wales, the nation of Scotland and, eventually, the regions of England will be engaged in a process of dialogue, debate and—yes—pressure, and in a listening process.

Andrew Robathan (Conservative, Blaby)

As someone who is Welsh by descent, I think that it is rather peculiar that the Minister should talk about creating a new democracy. One in four electors in Wales decided that they would like an assembly, whereas three in four either did not bother to vote or voted against the assembly.

Peter Hain (Labour, Neath)

That really is like an old gramophone record. The hon. Gentleman simply does not wish to accept the results of a democratic decision of the Welsh people. The referendum result was clear. It stands, and no one can challenge it.

Michael Ancram (Conservative, Devizes)

I wonder whether the Minister can explain to the Committee how that new democracy and new friendship were demonstrated by the argument between the Secretary of State and the leader of Cardiff county council—a member of the Labour party—over the location of the assembly?

Peter Hain (Labour, Neath)

As I understand it, my right hon. Friend and the council leader were engaged in a loving and intimate dialogue—

Ron Davies (Labour, Caerphilly)

Politically.

Peter Hain (Labour, Neath)

They were engaged politically, yes—not in any sense personally. I should like to comment—if you will allow me, Mr. Martin—on the supreme irony of the Conservative party's claim that it is listening to Wales. It would be the first time in its history that it has listened to Wales. Wales was not listened to by a Conservative Government for 18 long years—during which our jobs were attacked, our coal mines were closed and all the indices of deprivation—in housing, wealth, education and employment—plunged in comparison with the rest of Britain. Wales was left behind by the Conservative Government. The Conservatives did not listen to Wales and that is why, on 1 May, they were wiped out of Wales in the general election. The Government are confident that we will establish a new democratic relationship between the people of Wales and the House. Their views will be communicated through the House to the Government, and through the Secretary of State to the Cabinet. The Bill and its specific provision for finance for the Welsh assembly will guarantee a strong and lively democracy rather than one that is strangled from the centre—which is what Conservative rule has been all about. I urge the Committee to resist amendment No. 15 and to resist the Conservative party.

NATIONAL LOANS FUND LENDING

AUDITOR GENERAL FOR WALES

Michael Ancram (Conservative, Devizes)

I beg to move amendment No. 331, in page 42, leave out lines 28 and 29.

Michael Ancram (Conservative, Devizes)

Amendments Nos. 331, 332, 338 and 339 are probing amendments. Amendment No. 331 would delete subsection (2), which says: The person for the time being holding that office the office of the Auditor General for Wales— shall by the name of that office be a corporation sole. What is a corporation sole? What does it mean? What would happen if the Auditor General for Wales were not a corporation sole? Would the people of Wales suffer if he were not? Are there financial considerations in being a corporation sole? Does it assist him in carrying out his job? In short, is this a necessary provision? In my limited experience of such matters, it seems a strange provision. I am sure that the Minister will convince me otherwise. I shall listen with interest to his explanation.

Bernard Jenkin (Conservative, North Essex)

The Minister is a lost soul.

Michael Ancram (Conservative, Devizes)

If the Minister can explain how to transfer from a lost soul to a corporation sole, I shall be even more interested. The Bill allows the Auditor General to be removed from office on the ground of misbehaviour if the Secretary of State recommends his removal to the Queen. However, the Secretary of State may make such a recommendation only with the consent of the assembly. Amendment No. 332, which is another probing amendment, would delete that extra provision. The approach in the Bill seems rather long-winded. Is it necessary? Either there is misbehaviour sufficient to warrant removal from office or there is not. If there was a wrong accusation of misbehaviour, I presume that the Auditor General for Wales would have remedies. The assembly could second-guess the Secretary of State on what amounted to misbehaviour. What would happen if the Secretary of State and the assembly disagreed? Is it in the interests of Wales for an Auditor General to remain in office if the Secretary of State believes him to be guilty of sackable misbehaviour? Would that be good for respect for the authority of that important office? Would it not tend to undermine the position of the guardian of the financial integrity of the assembly? I ask in all seriousness whether we should guard against that danger and whether the provision requiring consultation with the assembly is necessary. Amendment No. 338 refers to clause 92(7). Will the Minister explain its purpose? Does a distinction need to be made between the work of the staff of the Auditor General in their ordinary functions and that requiring them to be a Crown servant for the purposes of the Official Secrets Act 1989? That seems a strange provision. I tabled the probing amendment to find out the thinking behind it. I should have thought that if one is a Crown servant for the purposes of the Official Secrets Act, there is some logic in being a Crown servant otherwise as well. Amendment No. 339 would omit clause 93(2). I tabled it because the provision seems odd. It appears to relate to the expenses of the Auditor General that cannot be met by income received by him. Provision is made for those expenses to be paid by others. I should have thought that either expenses were allowable and paid from outside, or not allowable and paid for by the Auditor General. The provision seems to cross those boundaries, and it sparked a degree of interest—not to say suspicion—in my mind. I should be grateful if the Minister could set my mind at rest and assure me that there is nothing to be suspicious about.

Rhodri Morgan (Labour, Cardiff West)

I assume that the answer to the many questions asked by the right hon. Member for Devizes (Mr. Ancram) relates to the staffing structures of the assembly and the fact that the Auditor General's staff have to be firmly placed outside the assembly's staffing structures. One of the controversies about setting up the assembly is whether Welsh Office civil service staff who will be transferred to work for the assembly will include what one could approximately call parliamentary staff. Such provision has been made separately for the Scottish Parliament but not for the Welsh assembly. The Welsh assembly's equivalent to parliamentary Clerks will not be separate from general assembly staff; they will be civil servants. There may be Chinese walls between them. In order to ensure that the Auditor General's staff are clearly not civil servants and not part of such an arrangement—which may itself come into question before the Bill has completed its passage—they have to be deemed a corporation sole. The Auditor General's staff will stand alone and be responsible only to the Auditor General. I am not absolutely sure of my explanation, so I shall listen to any other possible explanations. I believe that the Bill has been structured in such a way to address the issue of how to separate the Auditor General's staff and to whom they are accountable; it ensures that they are not part of the general civil service of the Welsh Office.

Cynog Dafis (Plaid Cymru, Ceredigion)

I wish to speak to amendments Nos. 477 and 478. Amendment No. 477 is not unlike amendment No. 339, but it would not omit so many lines of clause 93. It also concerns payment of the Auditor General's expenses and relates to additional expenditure that is not covered in the block. Would not such expenses be more appropriately met by the Auditor General's resources? In other words, why should not the money come from the Treasury? Amendment No. 478 is simply about openness, and would provide for the publication of accounts audited by the Auditor General. Will the Minister say whether such publication will be required?

Desmond Swayne (Conservative, New Forest West)

The question that occurs to me is whether the Auditor General is the servant of the assembly or of the Crown. From clause 90, it would appear that, as he is appointed by the Crown and can be sacked by the Secretary of State—albeit with the approval of the assembly—he is a servant of the Crown. However, under clause 91, he is to be paid by the assembly. I am not sure whether one can—or indeed ought to—serve two masters in that respect. Our task in Committee must be to remove potential points of conflict. One potential point is brewing in the arrangements for the dismissal of the Auditor General. If the Auditor General has lost the confidence of the assembly, which pays him, he should go, irrespective of what the Secretary of State might think. If he has lost the confidence of the Secretary of State, but still has the confidence of the assembly, the obverse of the conflict arises. The Bill must provide for one or the other. The merit of amendment No. 332 is clarity; it provides for one and not the other.

John Hayes (Conservative, South Holland and The Deepings)

I want to reaffirm the points raised by my right hon. Friend the Member for Devizes (Mr. Ancram) in two particular areas. First, I hope that the Minister will be able to satisfy my inquiry about whether it is necessary to make the Auditor General a corporation sole when, as I understand its legal implications, it would make the Auditor General legally liable. I am interested in examples of when that might be deemed necessary. The second point, which has been referred to by my hon. Friend the Member for New Forest, West (Mr. Swayne) and is dealt with by amendment No. 332, is the removal of the Auditor General. It could cause conflict to make his removal subject to, first, consultation and, secondly, the approval of the assembly. One notices that they are separate. Surely that could open up a can of worms because, if the Auditor General were in conflict with the assembly, the consultation and approval process would be fraught with difficulties. The amendments tabled by my right hon. Friend the Member for Devizes address both those issues. I should be grateful to hear what the Minister has to say about them.

Peter Hain (Labour, Neath)

This debate is clearly not a great crowd puller, but it seems to have been designed to keep a Minister on his toes. The Bill provides for the appointment of the Auditor General for Wales by Her Majesty, which underlines the post's independence. I accept that, as the right hon. Member for Devizes (Mr. Ancram) said, the amendments are probing, and I stress the importance of the Auditor General's independence. Although he will be appointed by Her Majesty, subsection (7) states that he shall not be regarded as holding office under Her Majesty or as exercising any functions on behalf of the Crown". As the Auditor General will not be a Crown servant—he will be an independent being—it is necessary to make clear his powers to enter contracts. That answers the legitimate questions asked by the hon. Members for New Forest, West (Mr. Swayne) and for Montgomeryshire (Mr. Öpik). 7.30 pm The right hon. Member for Devizes and the hon. Members for South Holland and The Deepings (Mr. Hayes) and for Montgomeryshire asked about corporation sole. My hon. Friend the Member for Cardiff, West (Mr. Morgan) said that it sounded fishy, but I shall let that pass. Subsection (2) provides that the Auditor General for Wales shall by the name of that office be a corporation sole. That means that he has a legal personality equivalent to that of a company. That replicates a similar provision in schedule 2(1) to the National Audit Act 1983, which applies to the Comptroller and Auditor General. It ensures that there will be no doubt about the power of the Auditor General for Wales to enter contracts for such mundane items as electricity or stationery for his office, or about his powers in more substantial matters such as the right to sue or be sued. The Auditor General's status as a corporation sole will mean that rights and liabilities can attach to the office rather than to the individual office holder—people can sue the office rather than the individual office holder. Amendment No. 331 would delete subsection (2) and throw the position into confusion. Amendment No. 332 would remove the requirement for the Secretary of State to consult the assembly before recommending to Her Majesty the removal of the Auditor General on the ground of misbehaviour. I accept that those are unlikely circumstances, but the White Paper made it clear that my right hon. Friend would advise Her Majesty on appointments that she made. We are considering requiring him to consult the assembly about those appointments by means of an order under clause 31.

Rhodri Morgan (Labour, Cardiff West)

There is a complex history to the ways in which extra-parliamentary figures can be removed in extraordinary circumstances. Today, many hon. Members have been considering whether the Director General of the National Lottery can be removed. Some directors general can be removed by a resolution of both Houses but, according to section 1(4) of the National Lottery Act 1993, which governs Oflot, The Secretary of State may remove a person from office as Director General on the ground of incapacity or misbehaviour. That is parallel to what we are discussing, except for the fact that the Auditor General is supposed to provide, for the Back Benchers, protection against an abuse of power by Front Benchers in the assembly or any quango or public bodies that are accountable to the assembly. The assembly should be involved in the decision to remove the Auditor General, however exceptional the circumstances might be.

Peter Hain (Labour, Neath)

My hon. Friend makes a valid point. As the assembly will be consulted about the appointment of the Auditor General, it is consistent that it should also be consulted about his removal from office—of course, we hope that the need for removal on the ground of misbehaviour will never arise. The assembly will have a closer working relationship with the Auditor General than my right hon. Friend will, so it is right that its views should be taken into account. Amendment No. 476 would require the Auditor General to obtain the assembly's agreement before appointing staff or securing services. The Government do not consider that appropriate, as it would fetter the Auditor General's independence, which is especially important to his role in ensuring that the most effective and efficient arrangements are made. The Auditor General will be obliged, under clause 93(4) to (7), to consult the assembly's Audit Committee, which will be chaired by a member of a minority party, about his budget. That offers real protection for the Auditor General's independence of operation. Although he will not be accountable to the Committee in the usual sense, he will have to consult it and his arrangements will have to be transparent. It is more appropriate that the assembly's views be taken into account in that way than by the means suggested in the amendment.

John Hayes (Conservative, South Holland and The Deepings)

The possible contradiction between accountability and independence lies at the heart of the amendments. Does not what the Minister said about amendment No. 476 compromise what he said about the removal of the Auditor General? If the Auditor General is to be truly independent, he should not be bound by the possibility of being removed through the processes of consultation and agreement that we debated earlier.

Peter Hain (Labour, Neath)

The hon. Gentleman makes a fair point, which I do not want to dismiss or deride. It is difficult to strike the correct balance in these matters, but I think that we have done so in the Bill.

Michael Ancram (Conservative, Devizes)

If the Secretary of State believed that there had been sufficient misbehaviour to warrant dismissal but the assembly disagreed, would not that give rise to an unsatisfactory situation in relation to the Auditor General and his ability to continue his work?

Peter Hain (Labour, Neath)

If the exact circumstances that the right hon. Gentleman describes arose, there would clearly be a crisis around the Auditor General. It is difficult to imagine that he would retain the confidence of the democratic fraternity in which he will have to operate in Wales. It is important that there is maximum agreement between the assembly and the Secretary of State, but if the two were in an open conflict, we would have to live with it. The arrangements suggested in the Bill are the best in the circumstances. Legislation that creates new public bodies often makes it clear that they are not to be regarded as exercising functions on behalf of the Crown, even when, as in the Auditor General's case, they are appointed by Her Majesty. That makes it clear which bodies or office holders are Crown bodies or Crown servants and which are not. That affects how other legislation applies to them. For example, Crown servants are automatically covered by the Official Secrets Act 1989. Crown bodies enjoy various exemptions under legislation. Amendment No. 338 would alter that unacceptably. In the case of the Auditor General and his staff, we decided to follow the precedent of section 3(5) of the National Audit Act 1983 and Statutory Instrument No. 200 of 1990, which provide that the Comptroller and Auditor General and his staff are not treated as Crown servants except for the purposes of the Official Secrets Act 1989. That Act should apply to the Auditor General for Wales and his staff because of the access that they may have to classified papers. Amendment No. 477, tabled by the hon. Member for Ceredigion (Mr. Dafis), would omit clause 93(1), which would leave it unclear as to who would meet the Auditor General's expenses. As the major benefit of his work would be for the assembly and its public bodies, it is right that the cost should fall to the Welsh block. The assembly will meet all his expenses, to the extent that they are not covered by income. The principal source of income will be audit fees for public bodies' accounts, under clause 93(3).

Cynog Dafis (Plaid Cymru, Ceredigion)

Can the Under-Secretary give the Committee any idea of the total costs of the Auditor General?

Peter Hain (Labour, Neath)

The costs will be modest. Amendment No. 339 would delete clause 93(2), which is modelled on a similar provision in section 4(6) of the National Audit Act 1983, which applies to the Comptroller and Auditor General. It is necessary to ensure that any sums payable as a result of a breach of duty are part of the expenses of the Auditor General for Wales. Without that provision, he might become personally liable for such costs and that would not be desirable. Amendment No. 478 would impose a duty on the Auditor General to publish accounts of the bodies that he audits. That is unnecessary for the following reasons. All accounts audited by the Auditor General will have to be laid before the assembly, under clause 97(5) in the case of the assembly's accounts and under clause 138 in respect of the accounts of public bodies, the relevant functions of auditing their accounts being transferred to him by order. Clause 103 requires the assembly to publish all accounts laid before it by the Auditor General. As to the form of the accounts prepared by the public bodies, that will be the subject of directions by the assembly. The relevant powers will be transferred from my right hon. Friend the Secretary of State for Wales to the assembly by Order in Council under clause 22. I hope that, with the benefit of those explanations, the right hon. Member for Devizes will agree to withdraw the amendment.

Michael Ancram (Conservative, Devizes)

I thank the Minister for those explanations, which were genuinely helpful in casting light in some dark places. In the previous debate, the Minister told us how mischievous we were to seek to include an amendment that would require the Secretary of State to consult, because he would do so anyway, and, in this debate, he has told us how irresponsible it would be to remove the requirement to consult, because the Secretary of State might not do so otherwise. Having been in the Minister's place, I know how difficult it is sometimes to reconcile notes from officials, but it is a joy for the Opposition to watch such tangles emerging. I beg to ask leave to withdraw the amendment.

ACCOUNTS OF ASSEMBLY SUBSIDIARIES ETC

Bernard Jenkin (Conservative, North Essex)

I beg to move amendment No. 343, in page 49, line 30, after 'Assembly', insert 'or the Welsh Development Agency'.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

With this, it will be convenient to discuss amendment No. 342, in page 49, line 30, leave out 'an' and insert 'a controlling'.

Bernard Jenkin (Conservative, North Essex)

I do not pretend that the amendments are desperately cunning or designed to stretch the Minister out on the rack of office as he seeks to discover our motive. They are simply probing amendments. Clause 99 covers the Auditor General's right of access to accounts relating to the assembly's expenditure, including accounts for any assembly subsidiary. The term "Assembly subsidiary" is defined in clause 99(4)(a) as any body corporate in which the Assembly holds an interest". Amendments Nos. 343 and 342 would make it clear that an assembly subsidiary should include, for the avoidance of doubt, subsidiaries of the Welsh Development Agency. Amendment No. 343 would also make it clear that we should keep to the usual meaning of the word "subsidiary" in corporate matters. In other words, a controlling interest would be necessary. It does not seem reasonable for the Auditor General for Wales to seek the accounts of businesses in which the WDA has a minority stake. That would not be a sensible use of his time or a suitable use of executive power. Companies are regulated by the Companies Acts when they publish financial information. I have been a venture capitalist, and I believe that the WDA should have appropriate shareholders' agreements with any private companies in which it has invested. It should not be necessary for the Auditor General for Wales to be able to intrude into private affairs. I hope that the Minister will say whether the Bill already includes the subsidiaries of the WDA in the meaning of the phrase "Assembly subsidiary", and also whether the word "subsidiary" includes any body corporate in which the assembly holds any interest.

Michael Ancram (Conservative, Devizes)

The Auditor General.

Bernard Jenkin (Conservative, North Essex)

If money from the WDA was invested in the business—even if it was only loan money—a loan agreement would provide the WDA with regular access to management accounts, probably every month. That would be the responsible way in which to conduct the investment. If investment was not conducted in that way, the Auditor General would have an argument with the WDA, not with the failed company. The company would have its own auditors who would ultimately be answerable to Companies House and the Department of Trade and Industry, which regulate the directors of companies. It would be for those bodies to decide whether the company was run properly, not the Auditor General for Wales.

Peter Hain (Labour, Neath)

I thank the hon. Member for North Essex (Mr. Jenkin) for the points he raises, which are genuine and probing, and which give us cause to reflect, especially about amendment No. 342. I am also grateful for the points raised by the hon. Member for Montgomeryshire (Mr. Öpik), which are legitimate. It may help the Committee if I explain the background to clause 99. It caters, among other things, for the possibility that the assembly may establish companies to provide certain services. An example might be if the assembly decided to follow the model of the House of Commons and have a gift shop or cafeteria, and if it decided to run those operations through a subsidiary company. The assembly might also be involved in trusts or charities. Clause 99 ensures that, regardless of the fact that the assembly may have subsidiaries that take a particular legal form, the Auditor General for Wales can have access to their accounts and the Treasury can issue directions about the form of their accounts, if necessary. As the Committee would expect, careful consideration was given to the definition of "Assembly subsidiary" in subsection (4). The problem with inserting the word "controlling", as amendment No. 342 would do, is that it would then be necessary to define "controlling", and it is our concern that whatever definition was adopted might enable the assembly to avoid the intended effect of clause 99. If the assembly held, for example, 1,000 shares in a company quoted on the stock exchange, that would not be an interest of the sort that would give rise to the Auditor General seeking access to the books of the company or to the Treasury seeking to direct the form of its accounts. In exercising their functions under clause 99, the Auditor General and the Treasury will be subject to review by the courts in accordance with well-accepted principles regarding the exercise of statutory powers. Amendment No. 343 includes a body corporate in which the Welsh Development Agency has an interest in the definition of "Assembly subsidiary". That is not appropriate either. Although the WDA has powers to invest in companies, any such company would in no sense be a subsidiary of the assembly because it would be a subsidiary of a public body funded by the assembly. We intend that the Auditor General will have full access to the WDA's books, including its investments in companies. That will be achieved by order under clauses 136 and 138, and we submit that clause 99 is not the proper place to deal with this matter. In inviting the hon. Member for North Essex to withdraw the amendments in the light of my explanation, I stress that, in the past 10 to 15 years in Wales, there has been much questioning of quangos and subsidiaries of quangos, and of the arrangements privately entered into under their aegis. It is absolutely vital that there is full transparency and accountability in future, and the Auditor General's powers in this respect, as provided for in the clause, give effect that objective.

Bernard Jenkin (Conservative, North Essex)

I am grateful for the way in which the Minister has responded to the amendments. I reiterate the need to clarify the question of what is an interest. He asserted that 1,000 shares in a quoted company would not constitute an interest in the accepted sense of the word, and I accept his admonition that defining what is a controlling interest can be extremely complicated. To give an example, one might have 10 per cent. of the ordinary share capital-10 per cent. of the votes—but, when the company goes into default in respect of an agreement, one might find that other, non-voting shares become voting shares and one suddenly has a controlling interest; or the nature of the shareholders' agreement might suggest that one has a controlling interest, even though one does not have a majority of the votes. I can understand the difficulty, but I am grateful to the Minister for accepting that there is an issue to be addressed. There is a danger that the assembly may find itself restricted in terms of what it can invest in for the benefit of Wales by having this potentially draconian influence—the Auditor General for Wales—behind it with the ability to interfere in the relationship between the assembly and its non-subsidiaries. I am grateful to the Minister for agreeing to look at the issue again. In the meantime, I beg to ask leave to withdraw the amendment.

EXAMINATIONS INTO ASSEMBLY'S USE OF RESOURCES

Michael Ancram (Conservative, Devizes)

I beg to move amendment No. 344, in page 49, line 34, leave out 'may' and insert 'shall'.

Michael Ancram (Conservative, Devizes)

The clause allows the Auditor General for Wales to investigate the economy, efficiency and effectiveness with which the Assembly has used its resources in discharging its functions. It goes on to allow him lay his report before the assembly. We believe that that permissive attitude is insufficient in this instance, where it is important that Auditor General should work in a disciplined and structured way. Amendment No. 344 would require him to make such investigations and amendment No. 346 would require him to lay the report before the assembly, rather than leaving it to his discretion. Amendment No. 347 would require the report to be laid before the House of Commons as well. The reason for that is that the resources in question will have been voted by the House of Commons and, where there is a report into the economy, efficiency and effectiveness with which they have been spent, it is right that the House should have sight of it. Amendment No. 345 is slightly different. As it stands, the Bill does not permit the Auditor General for Wales to question the merits or otherwise of the assembly's policies. I concede that there may be reasons for that, but it is an unnecessary restriction which could make it less easy for the Auditor General to carry out the permitted examination into the economy, efficiency and effectiveness with which the assembly has used resources to discharge its functions. It could be germane to such an examination to question the merits of the policy objectives in order to assess whether the resources used in pursuit of those objectives have been used in an economic, efficient and effective way. The clause as it stands, therefore, places an unnecessary hurdle in the way of the Auditor General.

Michael Ancram (Conservative, Devizes)

The Auditor General, who was spoken of earlier in glowing terms as an independent and responsible man, is not likely to do that, and to refuse to allow him to take such considerations into account is to restrict him overmuch. Amendment No. 349 is the last in the group. The Audit Commission may lay before the assembly a statement on any report by the Auditor General for Wales, and it may also take evidence on behalf of and report to the Public Accounts Committee of the House of Commons. There should be a requirement on the Audit Commission to lay such a report and to act on instructions from the Public Accounts Committee. The PAC, of which I was once a member, is the House's watchdog over the way in which resources voted by the House are spent and it should have that responsibility and power in respect of the Auditor General for Wales. I hope that the Government will give serious consideration, if not to these particular amendments, to the thought that lies behind them.

Peter Hain (Labour, Neath)

The Public Accounts Committee will have the right to look into any aspect of the assembly's finances and no amendment is required to enable it to do that, because it acts on behalf of this sovereign House. The drafting of clauses 100 and 102 reflects, as closely as possible, the present arrangements involving the Comptroller and Auditor General and the Public Accounts Committee under the National Audit Act 1983. The 1983 Act gives the Comptroller and Auditor General the power to carry out examinations into the economy, efficiency and effectiveness with which resources are used, but does not oblige him to do so. Amendment No. 344 would remove any discretion from the Auditor General for Wales, and I am not sure whether that was the effect intended. Under the 1983 Act, the Comptroller and Auditor General has no power to question the merits of the policy objectives of the Government or public bodies. Amendment No. 345 would allow the Auditor General to do that with respect to the assembly. We believe that that would be a significant change. Amendment No. 346 would require the Auditor General to lay before the assembly the report of any examination carried out by him. The Comptroller and Auditor General is under no such obligation under the 1983 Act, and it is not uncommon for reports to be prepared for action by management only, without being published or laid before the PAC. Amendment No. 348 would oblige the assembly's audit committee to consider and report on every set of accounts or reports laid before it by the Auditor General for Wales or his auditor. While I imagine that the PAC considers a large proportion of accounts and reports that are laid before the House, I doubt very much that it is required to consider and make a report on them all. The amendments would leave the assembly—

OBSERVING COMMUNITY LAW AND HUMAN RIGHTS

Oliver Letwin (Conservative, West Dorset)

I beg to move amendment No. 373, in page 51, line 43, leave out 'or any of the Convention rights'. I move the amendment with some slight trepidation, as I am speaking from a Front-Bench position to which I have no right. The amendment relates to clause 105 which, as Labour Members are aware, prevents the assembly from legislating in contravention of Community law and in contravention of the European convention on human rights, which are stipulated in the current Human Rights Bill. Our amendment would remove the reference to convention rights. That may seem an odd thing to do, but I hope that I shall be able to explain to the satisfaction of the Committee and that of the Minister why we seek that aim, and perhaps make him pause and reconsider. Perhaps I may be forgiven for first explaining why we do not seek to remove the reference to adherence to Community law. There is a slightly elaborate, but important, reason that shows why we seek to remove references to convention rights. Under the European Communities Act 1972, Community law is superior to our own once an adjudication has been produced by the European Court of Justice or, in the absence of such an adjudication or any contest, simply by virtue of its existence. If every Community law had a direct effect—if it applied automatically to the citizenry and to the Government—that would be an end to the matter. There would be no need for the part of clause 105 that relates to Community law because any legislation—in this case subordinate legislation produced by the assembly—which was in contravention of Community law would automatically face a conflict of law and be overruled and overwhelmed by the directly effective Community law in question under the 1972 Act. In addition, as the Secretary of State and his colleagues have repeatedly stressed, because the assembly is a legislature being set up under primary legislation and has subordinate legislative powers only, where there is an Act of Parliament, it will supervene on the assembly. There are parts of Community law that, at least arguably, do not have a direct effect. That is particularly true of the framework decisions that are envisaged in the Amsterdam treaty, such as the third pillar on justice and home affairs. In those cases, there is a real reason for the part of the clause that relates to the assembly not contravening Community law. Were there not such a clause, if the assembly happened to be the body to which it fell to implement a framework decision, it would be theoretically possible for it, in contravention of the United Kingdom's treaty obligations, but not in contravention of an Act of this Parliament, to legislate in a vein contrary to the intended spirit of that framework decision. It would then fall to the European Court to adjudicate. In the case where there was no direct effect, it is uncertain how that adjudication would fall. A situation could have been created in which the United Kingdom was in contravention of treaty obligations by virtue of an action of the assembly. For that reason, we do not seek to remove the reference to Community law in the clause. The situation is altogether different when we come to the European convention on human rights because the ECHR has no superiority to United Kingdom law. There is no Act of Parliament, existent or intended, that would give it such superiority. On the contrary, the way in which the Human Rights Bill has been drafted enacts some, but not all aspects of the ECHR into English law. It defines convention rights as those things that happen to have been enacted by that Bill. No circumstance could arise, therefore, under which there could be the possibility of the assembly legislating—legally under United Kingdom law—in contravention of those convention rights. By so legislating, it would automatically be in default of an Act of Parliament; as the Secretary of State and his colleagues have repeatedly stressed, the assembly cannot act in that way. There are only two possible explanations for the inclusion of the reference to convention rights. One is that, alas, we face another example of the Bill having been rather poorly drafted to include an otiose item. The other is a more sinister explanation—that there is the thought at the back of the draftsmen's minds, and hence at the back of some ministerial minds, that there might, at some later date, be a change in the Human Rights Bill, or in some other legislation passed in the House, which would allow the assembly to have a direct relationship with the ECHR. That would permit a situation to arise whereby something was defined as a convention right by an Act of this Parliament that had not been enacted into English law. Under those circumstances, the assembly would begin to take on a quite different character, because, in relation to a body external to the United Kingdom, it would have a special relationship—one different from that of the United Kingdom Parliament and not sanctioned by it. Were that the intention, we would wish to resist it. The structure of the argument is straightforward. There is a reason for the reference to Community law in clause 105, but there is either no reason for the convention rights reference because it is unnecessary or there is one and it is malign—to create the possibility of the establishment of a separate relationship. I happen to believe that it is probably error rather than intention that is at work. If that is so, I hope that, after due consideration, the Minister will offer the Committee the grand gesture of removing the offending phrase, perhaps by rephrasing the amendment, in order not to appear to accept our feeble wording.

Julie Morgan (Labour, Cardiff North)

I oppose the amendment. I am surprised by the reference of the hon. Member for West Dorset (Mr. Letwin) to sinister motives among others. The amendment reveals the official Opposition's fear of change of any kind. Not only do the Conservatives oppose constitutional change by opposing devolution, which is bringing power closer to the people, but they appear to be using the mechanism for scrutinising the Bill to express their opposition to the incorporation of the European convention on human rights into United Kingdom law by the Human Rights Bill. That appears to be the motive behind what their spokesperson said today. It is absolutely right and proper that the National Assembly for Wales should comply with the European convention on human rights, and that the Bill should say so. The assembly will have responsibility for all the functions of the Welsh Office, many of which are obviously fundamentally concerned with the rights covered by the European convention on human rights and its protocols, such as the right to life, liberty and security; respect for private family life, home and correspondence; prohibition of discrimination; freedom of peaceful assembly; the right to join a trade union; and the right to education. The national assembly needs to comply with all those rights, and the Bill should say so. I believe that the Human Rights Bill will receive its Third Reading in the House of Lords on Thursday 5 February 1998. The UK was the first country to ratify the convention, nearly 50 years ago, and 30 years ago the UK accepted its jurisdiction. I believe that we would all welcome the incorporation of the convention into UK law. I believe that the motive of the official Opposition in tabling amendment No. 373 is to express concern about those rights applying in UK law, and that they are using these Committee proceedings to express their concern. I believe that the European convention on human rights should be mentioned in the Bill, and that it is essential that the national assembly abides by the duties of the convention.

John Marek (Labour, Wrexham)

I agree with the contents of clause 105. I only wish that Ministers would write a few other things into the Bill, given that we had an interesting debate about whether some sort of needs formula would be better than the Barnett formula. If there is a bit of inconsistency, I hope that Ministers will think about the word consistency. It is important.

Win Griffiths (Labour, Bridgend)

The debate has been brief but illuminating. I congratulate the hon. Member for West Dorset (Mr. Letwin) on his contribution from the Dispatch Box. He had obviously thought a great deal about what he wanted to say. However—as you would expect, Sir Alan—I could not agree with all he said. In our opinion, clause 105 makes it clear that the assembly has no power to do anything that is incompatible with European Community law or any of the convention rights. An argument could be made—to a certain extent, the hon. Member for West Dorset did so—about whether it was necessary to mention convention rights, and whether reference to Community law would be necessary only in certain accepted instances. However, we felt that, in the case of both Community law and the convention, it would be appropriate to ensure that the Bill made the obligations of the assembly absolutely clear. The hon. Member for West Dorset is of course aware of the fact that, as my hon. Friend the Member for Cardiff, North (Ms Morgan) said, the Human Rights Bill, which deals with the issue of the convention, is passing through another place. My hon. Friend made a spirited and convincing argument for our proposal to include the convention in clause 105. I am pleased that the hon. Member for Montgomeryshire (Mr. Öpik) endorsed the clause from the Liberal Democrat Benches and that, once again, I had strong support from my hon. Friend the Member for Wrexham (Dr. Marek).

Ieuan Wyn Jones (Plaid Cymru, Ynys Môn)

In order to ensure that the spirit of inclusiveness pervades the whole Chamber, would the Minister accept that Plaid Cymru Members also welcome the inclusion of a reference to the convention in the clause?

Win Griffiths (Labour, Bridgend)

I am very happy indeed to take on board what the hon. Member for Ynys Môn (Mr. Jones) has to say on behalf of Plaid Cymru. Anyway, the Government decided that although, as the hon. Member for West Dorset said, the Human Rights Bill will apply to the assembly in any event, it should be made clear in the Bill that a failure by the assembly to observe the convention rights should be a devolution issue—that is, within the terms of part I of schedule 6. I was very pleased that the argument made by the hon. Member for West Dorset was in no sense an effort to allow the assembly to dodge its human rights responsibilities. We felt that the convention should be mentioned in the Bill because the assembly, in matters such as health, education and social services, will have the ability, directly or indirectly, to touch upon convention rights. It may be a belt and braces question in this case, but we felt that it would be better to do it that way—to make it clear that, although the Human Rights Bill, when enacted, will place a duty on the assembly, we consider this to be a devolution issue in terms of the assembly's responsibilities. I hope that, having heard those few words of explanation, the hon. Member for West Dorset will be prepared to ask leave of the Committee to withdraw the amendment.

Rhodri Morgan (Labour, Cardiff West)

On a point of order, Sir Alan. About half an hour ago, during the debate on clause 90, I indirectly made a reference to the powers under which the director general of the Office of the National Lottery could be caused to resign. I am given to understand that he has since resigned—probably not because I made that reference in the debate on clause 90 of the Bill. Have you received any notice from the Secretary of State for Culture, Media and Sport, indicating that he wishes to make a statement, tonight or tomorrow, confirming either that he has caused Mr. Davis to resign or that Mr. Davis has resigned anyway?

Oliver Letwin (Conservative, West Dorset)

I am grateful to the Minister, who entirely understood the brunt of my remarks, unlike the hon. Members who spoke in the debate, who seemed to think that I was suggesting that the assembly should not be forced to obey the European convention on human rights.

Rhodri Morgan (Labour, Cardiff West)

But the amendment says that.

Oliver Letwin (Conservative, West Dorset)

No, it does not, because the proposition is that the assembly will in any case be so forced by an Act of Parliament, which is where we believe that the burden should lie. I shall try to persuade the Minister to think slightly more about whether this belt and braces is only belt and braces or whether it may have unintended consequences. My reason for doing so comes straight from the Minister's speech, because he said that he wanted to ensure that, in the event of a conflict between the subordinate legislation of the assembly and the European convention or the Human Rights Bill, which is to become an Act, that would be a devolution issue. There is some real force in that argument. However, if there is force in that argument, it would also apply to many of the things that have been asserted by Conservative Members during previous sessions of the Committee. Yesterday, we discussed regulatory appraisals. I asked whether it would be the assembly that decided whether it was, or was not, in a specific case, appropriate for there to be regulatory appraisal, and the Minister assured me and the House that that was not a problem because, under the primary legislation governing particular orders which had been transferred by the transfer order to the assembly, a regulatory appraisal was already assured. That is a case in which, for the purpose of clarity, it would be advantageous for the matter to be written into the Bill, and it would be advantageous for it to be a devolution issue. Now the Minister and his colleagues have set their face against that in the case that I raised, and in 10 or 20 other such cases in Committee. They have established a tissue of precedents through the rest of the Bill suggesting that there should not be belt and braces, but rather a great economy of drafting. Wherever there is an underlying Act of Parliament that achieves a certain effect, the Government eschew putting that into the Bill. A lawyer will be able to make the argument with some force that in this particular case there must have been an intention stronger than merely to put it into the Act and make it a devolution issue. I wonder whether the Minister wants to achieve that, and whether it might not rebound on all of us—who knows who might then be in government? Although we are prepared to withdraw the amendment, I wonder whether the Minister might wish to reconsider.

Win Griffiths (Labour, Bridgend)

The argument that the hon. Gentleman is developing is essentially speculative. Although I would be prepared to look in detail at some of his arguments, the force of our feeling about the clause and the need for it is unlikely to be changed. I will write to him on the other issue he raises, and I hope that he will withdraw the amendment.

Oliver Letwin (Conservative, West Dorset)

That is a gallant response from the Minister. If, by any chance, this should prod him into the obverse reaction of putting into the Bill more of what we suggested in earlier sittings of the Committee to remedy the imbalance, that would be a greater gain even than the removal of this clause. In that spirit, I beg to ask leave to withdraw the amendment.

POWER TO PREVENT INCOMPATIBLE ACTION ETC.

Bernard Jenkin (Conservative, North Essex)

I beg to move amendment No. 441, in page 52, line 6, after 'international', insert 'treaty'.

Bernard Jenkin (Conservative, North Essex)

The clause is similar to clauses 105 and 106, except that clause 107 refers specifically to other international obligations. Our amendments are intended to make it clear that international obligations comprise treaty obligations. I have some questions for the Minister. When is an international obligation an international obligation, if it is not a treaty obligation? Could he give an example of an international obligation that is not a treaty obligation? Under what circumstances do the Government envisage that they would impose a non-treaty international obligation on the assembly? That is what the clause gives them the power to do. To some extent amendment No. 446 revisits the issue already addressed by my hon. Friend, so I will not address it again.

Win Griffiths (Labour, Bridgend)

That was a succinct introduction to the amendments. I am grateful for the clarity with which the hon. Gentleman made his points, especially as I have an answer to them. Clause 107 ensures that my right hon. Friend the Secretary of State has the power to prevent the assembly from carrying out acts that are incompatible with the international obligations of the United Kingdom, other than Community law obligations and obligations not to do with acts incompatible with any of the convention rights that we have just discussed. However, the United Kingdom has other international obligations that have not all been incorporated in domestic legislation. Hence the need for the reserve power in clause 107 to allow my right hon. Friend to intervene if the assembly is considering undertaking an incompatible action or has already undertaken it. Given the interrogative nature of the hon. Gentleman's remarks, I assume that this is a probing amendment to find out what we have in mind. Not all the international obligations of the United Kingdom are in the form of a treaty. Some take the form of conventions, protocols or heads of agreement—for example, those that his own Government negotiated, the Rio declaration on the environment and development; Agenda 21, a programme of action for sustainable development also agreed at the Rio summit; and the more recent convention for the protection of the marine environment for the north-east Atlantic. None of those is a Treaty. Amendments Nos. 441 to 445 would leave the United Kingdom Government without the power to deliver certain obligations to which they had committed themselves, to the extent that those obligations fall to the assembly's remit. That is why we have used the word "obligations" in preference to "treaties". Not all the commitments made by the United Kingdom are enshrined in treaties at an international level. By using the word "obligation", we are able to ensure that matters arising out of the Rio summit, for example, can be taken on board and acted on by the assembly.

Rhodri Morgan (Labour, Cardiff West)

I shall ask my hon. Friend a few further questions arising from my reading of the impact of the Opposition amendments on clause 107. It is an important clause, especially because of the expanding field of environmental obligations, many of which we refer to loosely as treaties, but which are not in fact treaties. People talk about the Rio treaty—which, as my hon. Friend noted, is not a treaty—and the two subsidiary agreements, the bio-diversity agreement and the global warming convention. I am not sure whether I have used the right terms, but the agreements are frequently referred to as parts of a treaty, perhaps because of the importance of the people who attended the Rio summit and signed the agreement, including the President of the USA and the Prime Minister of the United Kingdom. The Conservative amendments, if I read them correctly, would confine the then Prime Minister—no longer such a figure of importance—who signed the agreement on behalf of the United Kingdom Government. If the amendments were accepted, they would remove from the Welsh assembly any obligation to act pursuant to the Rio summit, because the agreements are not treaties. That is probably not what Conservative Front-Bench Members want. If their Prime Minister signed the Rio summit documents bringing into being a British obligation to comply with them, presumably they consider them important, but their amendments would render the agreements useless in the context of the Welsh assembly. The amendments would exclude any agreement that was not formally a treaty from the obligations that the Welsh assembly would have to follow and which, as a reserve power, the Secretary of State could instruct the assembly to carry out. That raises an interesting issue that has not yet been touched on. What if the Secretary of State himself were in breach of those treaty—or let us say convention or protocol—obligations? The outstanding example is exactly pursuant to the Rio summit, when there was the bizarre situation of a difference in interpretation of the obligations of the UK Government for Wales and for England by the then Secretary of State for the Environment and the then Secretary of State for Wales, the right hon. Member for Wokingham (Mr. Redwood). The then Secretary of State for the Environment, the right hon. Member for Suffolk, Coastal (Mr. Gummer), interpreted the Prime Minister's signature to the global warming convention as requiring him to issue a new series of planning policy guidance notes, one of which said that henceforth there would be no more out-of-town shopping centre developments in England, as they would lead to an increase in car exhaust emissions and thus contravene the global warming policy. 8.30 pm However, the then Secretary of State for Wales, who was part of the same unitary state—as we often say in this debate—and a member of the Cabinet led by the Prime Minister who had signed the Rio summit agreement, took an entirely different view and said, "In Wales, we shop till we drop." He welcomed those frustrated property developers—who were no longer able to build out-of-town shopping centres in England—to Wales with open arms, and refused to issue a parallel planning policy guidance note. As a result, there was total confusion among property developers, lawyers and planning consultants. Although it was the same country under one Prime Minister who had signed the agreement, there were two opposite interpretations of what constituted acceding to the obligations. Looking forward 50 years—when we might see the return of a Conservative Prime Minister and therefore a Conservative Secretary of State for Wales—what will happen if that Secretary of State were in breach of any kind of reasonable understanding of the obligations? In other words, what if—it is the sort of scenario that we present when we are trying to send the children quietly to bed—the right hon. Member for Wokingham were to return as Secretary of State for Wales? What if he places a bizarre and completely off-the-wall interpretation on our protocol or convention obligations, particularly regarding environmental law? I must press the Minister on that issue. How will we guard against the completely off-the-wall interpretations of future Conservative Secretaries of State for Wales—in the unlikely event, possibly after I have departed this mortal coil, that the Conservatives are returned to power? Such a person would not be a suitable judge of whether the assembly were abiding by international environmental obligations. He could hardly ensure that the assembly complied with those obligations if he did not comply with them also. In that case, we would look to the assembly to ensure that the Secretary of State abided by international environmental obligations. It is not only a matter, as the clause implies, of the Secretary of State acting as a policeman and trying to ensure that the assembly complies with international environmental obligations. If the Minister can answer that point clearly, succinctly and convincingly, I promise not to ask him any questions about the Cardiff bay barrage.

Win Griffiths (Labour, Bridgend)

I thank my hon. Friend the Member for Cardiff, West (Mr. Morgan) for that contribution, and for his piercing question regarding the actions of a previous Secretary of State for Wales. I thought initially that he intended to raise the subject that he has said he will not mention. As to the question of out-of-town shopping centres in Wales, we have made it clear that a test must be applied in order to determine whether such planning applications may go ahead. Our inspectorate has examined several such applications. It is a fairly simple and straightforward process. If the assembly considered a future Secretary of State for Wales to be in breach of a convention, such as the Rio biodiversity agreement, it could request a judicial review—as could anyone with an interest in such matters. In other words, if the Secretary of State believed that the assembly was acting within the terms of an international obligation but the Friends of the Earth or the Royal Society for the Protection of Birds thought that it was not, there would be an opportunity for a judicial review. In the end, that is the backstop position regarding any Government action that is deemed to contravene our international obligations.

Rhodri Morgan (Labour, Cardiff West)

Whether the Secretary of State for the Environment in England or the Welsh assembly is in compliance with environmental protocols or conventions is frequently a unilateral matter for them to decide. It is difficult to envisage a judicial review challenge succeeding, because it is for the Government to decide whether they have complied with the obligations of the global warming convention or the biodiversity agreement, for example. For instance, the Government may decide to introduce the grizzly bear to Snowdonia saying, "We have done this in pursuance of what we believe to be our obligations under the biodiversity agreement." That is the difficulty.

Win Griffiths (Labour, Bridgend)

That is a matter of judgment. Anyone who thought that the Secretary of State or the National Assembly for Wales was breaking an international obligation could seek a judicial review. It would then be for the judge to decide whether the Government or the assembly had acted unreasonably and ignored its obligations under some international agreement.

Bernard Jenkin (Conservative, North Essex)

I am grateful to the Minister for his explanation, which I think the Committee found illuminating. It is certainly not the policy of Her Majesty's Opposition to create a situation whereby we are in breach of any international obligations—least of all those with such noble aims as Agenda 21 and other international environmental agreements. The hon. Member for Cardiff, West (Mr. Morgan) once again demonstrated his talent for extending our deliberations. I have a button on my computer that allows one to precis a text. I wonder how short the hon. Gentleman's speech would have been if I had entered it into my computer and then pressed that button—but I digress. I must raise a serious point about the nature of clause 105 and other similar clauses in the Bill. We enter into international obligations under the royal prerogative. The House finds it difficult to regulate that process, as we interfere with the exercise of the international prerogative upon the initiative of the House rather than by way of the Government seeking leave of Parliament to exercise the prerogative. Treaties and international obligations are laid on the table under the Ponsonby rule. The effect of entering into international obligations—be they treaty obligations as suggested by our amendment or other obligations—is to strip the Welsh assembly of its powers. Every new international obligation effectively creates a new reserved area, which is a no-go zone for the Welsh assembly. The Secretary of State may, by order, direct the assembly to take a certain action or to abstain. We should bear that in mind.

Win Griffiths (Labour, Bridgend)

If I have understood his comments correctly, the hon. Gentleman implies that the Secretary of State would be the prime mover in such matters. Clause 107 gives the Secretary of State the power to intervene if the assembly does not fulfil the international obligations for which it has some responsibility under the Bill. It is not for the Secretary of State to take these powers to himself, but to keep a watchful eye on the assembly to ensure that it is using its powers appropriately.

Bernard Jenkin (Conservative, North Essex)

I understand the thrust of the Minister's comments. I am postulating a slightly more advanced scenario, which is that the Government will be entering into international obligations purposefully to enable the Government to take powers over the assembly. That may seem far-fetched, but let us consider it in the context of the example given by the hon. Member for Cardiff, West, which involved a planning issue. Let us suppose that the assembly had plans to enter into a certain type of development which the Government regarded as unethical or contrary to the environmental purposes of their policies. They could enter into an international agreement to oblige them to exercise by order a prohibition on the assembly. It is a constitutional conundrum that new international obligations could be entered into by the prerogative of the Crown without the usual scrutiny of Parliament, thus giving the Secretary of State power by order to circumscribe the powers of the assembly.

Win Griffiths (Labour, Bridgend)

I felt quite happy with the way in which the hon. Gentleman was presenting his argument in the early and middle stages of the debate. At the end, however, he spoiled his argument by taking it to absurd lengths. It is perhaps an example of what has happened on other occasions when there has been a triumph of form over substance. I ask the hon. Gentleman to think twice about the idea that, to deal with a planning matter, the United Kingdom Government would scurry around the world looking for an international obligation that they could enter into to stop the assembly carrying out an act that came within planning law. That is absurd. Setting that aside, the arguments that the hon. Gentleman advanced on other matters were well made. I hope that I have been able to explain to him the intentions that lie behind the clause and why it is important to keep the clause in its substance.

Bernard Jenkin (Conservative, North Essex)

I am embarrassed that I have upset the Minister. I thought that we were developing a good relationship. Before it goes any further awry, I beg to ask leave to withdraw the amendment.

DEVOLUTION ISSUES

Michael Ancram (Conservative, Devizes)

I beg to move amendment No. 447, in page 79, line 13, leave out from first 'the' to end of line 14 and insert 'Appellate Committee" means the Appellate Committee of the House of Lords.'.

Michael Ancram (Conservative, Devizes)

This group of amendments is not as daunting as it may seem because all the amendments seek to achieve the same purpose. We are, however, seeking to address a significant point, and to question why the Judicial Committee of the Privy Council, rather than the House of Lords, has been chosen as the arbiter on devolution issues. That is a serious question. I accept that the Privy Council was mentioned in paragraph 3.43 of the White Paper, but it was a minor mention and gave no justification for the selection of the Privy Council-except to say that the body would produce "a speedy decision". As a lawyer, I doubt whether that will necessarily be true of any court. If that was the only reason for selecting the Privy Council, perhaps it was not the best; perhaps the Privy Council should not have been chosen as the body to which such matters should be submitted. We are seeking to replace the Privy Council with the House of Lords, the senior appellate court within our system. I say that even as a Scottish lawyer because, although the House of Lords does not have appellate jurisdiction in criminal matters in Scotland, it does in civil law. 8.45 pm We wonder why a court for which there is a great deal of respect and which cannot be challenged as political in any way, or regarded as tarnished as being part of the House of Lords, where reform will be taking place, is being sidestepped. The House of Lords is a court of the United Kingdom; it is composed of judges from the United Kingdom; and the issues of which we are speaking will be United Kingdom issues. They will arise between parts of the United Kingdom, and it is right that, within the United Kingdom, they should be decided by a court of the United Kingdom. The Judicial Committee is not a court of the United Kingdom in the same way; it goes far wider. I have taken the precaution of reading the latest list applying to the Judicial Committee: judges of the United Kingdom naturally appear on it, including the Lord Chancellor, the Lord President, Lords of Appeal in Ordinary and such other members of the Privy Council as shall from time to time hold, or have held, high judicial office. But the list contains other members, most of whom, interestingly enough—I am sure that the reason is the quality of the country's law—come from New Zealand. There are other members from Australia, Barbados, the Eastern Caribbean supreme court, the Bahamas and Jamaica. The Judicial Committee cannot be regarded as a court which has jurisdiction solely within the United Kingdom or as a court of the United Kingdom. I look forward to hearing whether the cosy relationship that has existed between members of Plaid Cymru and the occupants of the Treasury Bench during the past few debates will persist. I have read over the past few days that the Scottish National party is seriously concerned about the use of the Judicial Committee. It takes the view that such matters should not be put before members who, however eminent they may be in jurisprudential terms, may not be fully aware of all the implications of the issues within these islands. We are seeking to provide an appellate body in which all parts of the United Kingdom can have confidence, whose judges are known to Members of the House of Commons and to the various parts of the United Kingdom. I fear that the Judicial Committee proposal will give rise to uncertainty about the expertise that may be brought to bear. The Opposition have a further concern, which is important in the context of the arguments that we were advancing earlier about the integrity of the Union. We are considering disputes that will arise between members of the United Kingdom and from powers that have been delegated from the House of Commons. I shall not return to the supremacy argument, but there may be doubts about the vires. To take these issues out of the United Kingdom context and place them in an international arena will give them a nature that will be entirely inconsistent with devolution within the United Kingdom. For that reason, too, I hope that the amendments will be given serious consideration by the Government.

Denzil Davies (Labour, Llanelli)

I have some sympathy with the arguments advanced by the right hon. Member for Devizes (Mr. Ancram). I suggested earlier—and not very seriously—that the Judicial Committee of the Privy Council was perhaps being used because Scotland and Wales would be dependent territories. The right hon. Member Gentleman has made a serious point. It is surprising that all devolution issues are to go to the Privy Council. Perhaps the same judges would sit in the Privy Council and the House of Lords. Perhaps the Minister will say that Mr. Justice Cooke, the President of the New Zealand Court of Appeal, or the President of the East Caribbean Court of Appeal, will not be chosen to hear such cases. Why has the Privy Council, which is an excellent court but a bywater in many respects in terms of United Kingdom law, been elevated to such a position? I would think that the House of Lords could do the job perfectly well. I was surprised to hear that the Scottish nationalists objected to the use of the Privy Council. I thought that they might object to the House of Lords being the court of final jurisdiction. No doubt the Minister, when he replies, will explain it all.

Michael Ancram (Conservative, Devizes)

To be fair, I should make it clear that what I read was that the Scottish National party did not like the Judicial Committee of the Privy Council. I am not aware of the SNP's views on the House of Lords.

Denzil Davies (Labour, Llanelli)

I am still slightly confused. I should have thought that the SNP would have wished it not to be the House of Lords, which might be seen to be an English court, whereas the Judicial Committee has a different pedigree.

Elfyn Llwyd (Plaid Cymru, Meirionnydd Nant Conwy)

I had no intention of chipping into the debate but have been goaded into doing so by the right hon. Member for Devizes (Mr. Ancram). I do not speak for the Scottish National party, which has its own view, but I have every confidence in the Privy Council and can see no reason why it should not be selected. That may, of course, further the cosy relationship with the Treasury Bench. I was not aware of it as such, but if it means having to adhere to that cosy relationship, in this instance I do so.

John Marek (Labour, Wrexham)

I also had no intention of speaking in the debate. The right hon. Member for Devizes (Mr. Ancram) made a serious point. Let me see whether I can put the other argument. If it were to be the House of Lords, there might well be many more English—I use that word advisedly—rather than Scottish or Welsh judges, and there might then be arguments within the Principality on whether a decision was fair, unbiased and so on. The Judicial Committee, with judges from the Commonwealth, will provide a breath of fresh air, a bit of independence and a disinterested view. I am not accusing judges of being anything other than disinterested, but they should also be seen to be disinterested. That is the nub of my argument. If it were the Judicial Committee, with judges from the Commonwealth and so on, it would be easier to get a quorum of judges to sit on a particular case, and the public's perception that those judges were disinterested would be much clearer.

Bernard Jenkin (Conservative, North Essex)

What about Estonia?

Nigel Evans (Conservative, Ribble Valley)

Yes, but you are working on it.

Oliver Letwin (Conservative, West Dorset)

I wish to speak for one minute, to point out that this is an extraordinary debate, because we are debating which of the two bodies is appropriate. That either should have been nominated to perform the task is remarkable—the more so if it is to be, as it were, exported to the Privy Council—because what we are doing is to ask an English court to adjudicate about the supremacy of Parliament. That is the most extreme example of departure from constitutional convention contained in the Bill. The notion of devolution itself is a most radical measure. It is extraordinary that it should not be allied to the greatest possible conservatism in the choice of court. That seems to me the strongest argument in favour of the argument of my right hon. Friend the Member for Devizes (Mr. Ancram).

Win Griffiths (Labour, Bridgend)

This has been another interesting debate, with quite curious trains of thought in relation to what we are trying to do with the Judicial Committee of the Privy Council. As the right hon. Member for Devizes (Mr. Ancram) said when moving his amendment, we made it clear in the White Paper—however brief the reference might have been, it was quite explicit—that the Judicial Committee of the Privy Council is the judicial mechanism that the Government have selected to resolve disputes about the assembly's use of its powers. Therefore, the point made by the hon. Member for West Dorset (Mr. Letwin) about Parliament is not strictly necessary, because it relates to whether the functions set out for the assembly are being carried out appropriately, just as the Law Lords can consider issues in relation to the House if it is felt that a Minister is not carrying out his or her duties appropriately. The arrangements that we have made in the Bill are similar to those in the Scotland Bill, although, of course, in that case there is the issue of the primary legislative powers of the Scottish Parliament. We believe that it is highly desirable that the same court should be able to deal with cases that could arise from the new constitutional arrangements for Wales and Scotland that the Government are putting in place. The provision has been included just in case there is a problem. We want to say not that there will be problems, but that there should be a mechanism. The Judicial Committee acts now as the final constitutional court of appeal for various Commonwealth dependencies and colonies, which were mentioned earlier by my right hon. Friend the Member for Llanelli (Mr. Davies). As it already has that role, we thought it appropriate to use its experience of handling cases that raise constitutional issues. We also believe it important that a flexible mechanism should be in place to allow the assembly's powers to be resolved promptly. The amendments would add to the work load of the Appellate Committee of the House of Lords. I am not sure that they would lead to prompt decisions on cases, bearing in mind the provisions in the schedule for cases to be referred on appeal. In that context—this deals with the point raised by the right hon. Member for Devizes and my right hon. Friend for Member for Llanelli—paragraph 33 of schedule 6 gives greater flexibility about the membership of the Judicial Committee of the Privy Council than exists for the membership of the Appellate Committee of the House of Lords. The Judicial Committee can draw its members from any of those who hold or have held the office of a Lord of Appeal in Ordinary, or certain high judicial offices. That includes Lord Chancellors and judges of the High Court and of the Court of Appeal in England and Wales or Northern Ireland, or of the Court of Session in Scotland. However—this is the crucial point—schedule 6(33)(b) excludes judges from the colonies or the Commonwealth, because it refers to ignoring for this purpose section 5 of the Appellate Jurisdiction Act 1887". I hope that, in the spirit in which I have given my information, the right hon. Member for Devizes will feel able to withdraw his amendment.

John Marek (Labour, Wrexham)

It is clear that that provision will remain in the Bill, but I think that that is a great pity. It would have introduced a breath of fresh air, and a bit if disinterestedness, if some of the judges who have been excluded had been able to make decisions.

Win Griffiths (Labour, Bridgend)

That is obviously my hon. Friend's view, but we feel that it is appropriate for such matters to be settled in the context of, so to speak, the member states of the United Kingdom.

Michael Ancram (Conservative, Devizes)

I listened carefully to what the Minister said, but I am not entirely convinced by his arguments. He seems to be riding two horses in opposite directions. First he says that the Judicial Committee will be able to deal with cases swiftly because—he hopes—there will be very few, if any; then he tells us that to give them to the House of Lords would overload the House of Lords. He must decide whether there will be many cases or very few.

RELATIONS WITH LOCAL GOVERNMENT

Elfyn Llwyd (Plaid Cymru, Meirionnydd Nant Conwy)

I beg to move amendment No. 469, in page 53, line 14, at end insert— '(1A) The Assembly shall have regard to the published plans and strategies of local authorities in Wales in making decisions which specifically affect the communities of those local authorities.'. Let me begin by saying—at the risk of drawing fire from the Conservative Front Bench—that clause 110 is welcomed by anyone who respects local government and the need to develop and nurture the relationship between it and the national assembly. The clause requires the assembly to provide a scheme to sustain and promote local government and requires it to form a partnership council with representatives of local government. I firmly believe that the effective governance of Wales will require a working partnership between local government, the voluntary sector and the national assembly. The clause creates a framework within which local government and the national assembly can share understanding, objectives and a programme of agreed action. The framework will not avoid all differences—nor should it—but it will allow the potential for resolution through dialogue. The clause also allows a partnership between local government collectively and the assembly. It does not refer to the need for the assembly and its agencies to consider the objectives of individual local authorities. Elsewhere, the Government recognise the role of each local authority in providing community leadership, working with local communities to identify needs and priorities and developing local plans and strategies that can lead and assist all organisations seeking to work in those communities. The briefing issued by the Welsh Local Government Association states: The Association believes that it is in the development of community leadership that local authorities can most enhance their contribution. However, it is not enough for local authorities to provide leadership, there needs to be an incentive for other parts of government to consider the leadership that is provided. No doubt the assembly will have executive roles that will directly affect specific local communities. For instance, it will take over Tai Cymru's role in financing social housing development. At present, Tai Cymru is required by the Secretary of State to have regard to the housing strategies of local authorities. It is suggested, therefore, that the assembly, in this and all other executive actions, should be required to have regard to the plans and strategies of local authorities in specific decisions that affect local communities. The amendment is straightforward, clear and easy to understand. It would not affect the development of national policies by the national assembly, but it would require it, in specific decisions following on from those policies, to have regard to the plans and strategies of local authorities in Wales. That would not give local authorities any right of instruction or veto, but give them some assurance that, when they invest in the development of local strategies, those strategies will have some influence and will not be ignored in, as it were, the painting of the larger picture. In essence, the system would be little different from that whereby central Government need to have regard to local structure plans in determining planning issues, for example. Indeed, planning appeals could not be held without proper and due regard to local structure plans that are considered to be of extreme importance. To put it another way, the amendment is the essence of subsidiarity in statutory form. Furthermore, it adds clarity to the statement, welcome though it is, that the national assembly is bound to sustain and to promote local government. I suspect that, at some point, the word "otiose" will be mentioned by someone over yonder—who has left the Chamber, so we are spared its use for the time being—but I would appreciate a detailed response from the Minister.

John Marek (Labour, Wrexham)

I have general sympathy with what the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd) proposes, but I cannot support it. The principal reason is that we are legislating for a national assembly; we should give it status and authority and assume that it will carry out its functions properly—and not try to tie it down in primary legislation. I have made that point before. I have every confidence that the national assembly will want to work in partnership with local councils. From that point of view, it is better for that to be done through the assembly's Standing Orders, procedures and traditions as they develop, rather than through legislation passed through this Chamber that tries to tie the assembly down to something that it should be doing itself. I hope that, as a result of that general point, or perhaps as a result of what my hon. Friend the Minister says, the hon. Member for Meirionnydd Nant Conwy will feel able to withdraw his amendment. There are other problems with the amendment. At present, structure plans have to be accepted by the Secretary of State, possibly with an examination in public. Structure plans will, however, be the creature of the national assembly, so it is highly unlikely that the assembly will, in a cavalier manner, dismiss a structure plan for a particular unitary authority and try to impose something else. If it does that, it may have a particular reason, but that is by the way because the amendment says that the assembly has to "have regard to" and, of course, it can have regard to something and then nevertheless decide something contrary. Unitary authority decisions can be cavalier in the extreme. Eight or 10 years ago, a Welsh Affairs Committee investigation found that three authorities—Anglesey, Cardiganshire, or Ceredigion, and Delyn—had policies on housing in the countryside, but disregarded them. There were departures from the local plan to such an extent that they prompted comment and an investigation by the Select Committee. I have confidence in local authorities, which I support. The National Assembly for Wales must have oversight, and it should be able to take a view without having to face a judicial review. It should not be constrained too much by a local authority's strategic policies that do not make good sense or to which it does not abide, or because the policies that the authority is implementing are not in writing. The issue is complicated. I have no wish to offend anybody, but I have to say that there are good and bad councillors, as I guess there are good Members and bad ones. The assembly must have respect and status and it must have the final say. I do not wish to have its powers trammelled by the amendment. I sympathise with some of the aims behind the amendment, but I am convinced that the assembly's Standing Orders will contain precisely the amendment's principle.

John Marek (Labour, Wrexham)

We could argue about that, but time is short. We are close to the fulcrum of the argument. I prefer the route that I have suggested, but the hon. Gentleman would go the other way. Let us hear what the Minister has to say.

Win Griffiths (Labour, Bridgend)

As the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd) said when he ably moved and spoke to his amendment, its purpose is to place a statutory duty on the assembly to have regard to the published plans and strategies of Welsh local authorities when taking decisions that will affect particular communities. It is to be expected that the assembly will always attempt to ensure that its actions and decisions are sensitive to local needs and aspirations. The hon. Gentleman mentioned the abolition of Tai Cymru and the assignment of its housing function, ultimately, to the Welsh assembly. As he said, Tai Cymru provides finance after engaging in a process in which it pays due regard to local authorities' housing strategies. It also provides a good example of how a partnership can work without specific statutory goals or requirements. Furthermore, such a partnership exists also in the planning sphere. 9.15 pm The amendment is unnecessary, particularly because the Bill provides for a Partnership Council. The hon. Members for Meirionnydd Nant Conwy and for Montgomeryshire (Mr. Öpik) and my hon. Friend the Member for Wrexham (Dr. Marek) raised important issues that should be examined in the context of the Partnership Council, which will call for the assembly to work closely with local authorities in a spirit of partnership, with mutual respect for each other's role. Discussions at the council are likely to cover the key strategic issues that face the assembly and the major quangos in Wales, which provide an important interface for local authorities. We have to look ahead a little further. The Government have separate proposals for strengthening local government that, this summer, will be the subject of a White Paper for Wales. I cannot reveal the contents of the White Paper—[HoN. MEMBERS: "Oh, go on."] As I am in Committee and not at a press conference, perhaps I can say one or two things. The White Paper is likely to propose a duty on local authorities to improve the economic, social and environmental well-being of local communities. Ultimately, that proposal will enable individual local authorities to influence more effectively the local plans and priorities of a wide range of public bodies. We believe that the proposal, combined with the Partnership Council, will adequately address the issues raised by amendment No. 469, which would take a step too far the already innovative and ambitious project of a partnership between central and local government. The Government have already introduced that partnership, and my right hon. Friend the Secretary of State has already signed an agreement on how it will work between local government and the Welsh Office. In an intervention on my hon. Friend the Member for Wrexham, the hon. Member for Meirionnydd Nant Conwy said that part of the purpose of his amendment is to achieve a healthy and developing partnership between central and local government. Because of the actions of my right hon. Friend, the Bill's proposal to establish a Partnership Council and proposals in the White Paper— which will be published early in the summer—to strengthen the role of local authorities, we believe that the amendment is a step too far. I hope that the hon. Member for Meirionnydd Nant Conwy will accept that the Government have a very positive agenda and that his amendment—although we are sympathetic to its desired aim—is not strictly necessary.

Elfyn Llwyd (Plaid Cymru, Meirionnydd Nant Conwy)

We have had a short but interesting debate, and the Minister's response has been quite encouraging. It is also getting late. If I had know about the imminent White Paper I might not have tabled the amendment. In the new spirit of inclusiveness, we get to hear things a bit earlier nowadays. Perhaps it will be earlier still in future. Bearing that in mind and the fact that we have had a useful debate and a positive response from the Minister, I beg to ask leave to withdraw the amendment.

Nigel Evans (Conservative, Ribble Valley)

I beg to move amendment No. 355, in page 53, leave out lines 15 to 42.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

With this, it will be convenient to discuss the following amendments: Government amendment No. 376. No. 359, in schedule 7, page 84, leave out from beginning of line 3 to end of line 31 on page 85. Government amendments Nos. 377 and 378. No. 470, in page 84, line 21, at end insert— '(1 A) The members appointed under sub paragraph (1) shall include one member nominated by each county council and county borough council in Wales.'. Government amendments Nos. 379 and 380. No. 358, in page 84, line 35, at end insert— '(6) Members of the Partnership Council shall not be paid remuneration or expenses by the Assembly, any local authority or otherwise out of public funds in respect of any of their activities as members.'. Government amendments Nos. 381 to 385. No. 471, in page 85, line 15, leave out 'once' and insert 'three times'. Government amendment No. 386.

Nigel Evans (Conservative, Ribble Valley)

We have many amendments to consider in a relatively short debate, but I am delighted to speak to amendments Nos. 355, 359 and 358 in the names of my hon. Friends and myself. We have spoken at some length about local government this evening, and it is important for devolution to ensure a vital role for local authorities. I understand the importance of local authorities as I was a county councillor for six years, first for Sketty and then for Ty Coch, knocking on doors and representing the grass-roots feelings of the people in those areas on West Glamorgan county council. I recall two particular issues on which I sought meetings with the Welsh Office. One concerned the 24-hour opening of the accident and emergency unit at Singleton hospital.

Ron Davies (Labour, Caerphilly)

When was that?

Nigel Evans (Conservative, Ribble Valley)

It was between 1985 and 1991—in those halcyon days.

Ron Davies (Labour, Caerphilly)

That was a long meeting.

Nigel Evans (Conservative, Ribble Valley)

It was, but we got we wanted in the end. The other meeting concerned some land in the Ty Coch area that we were seeking to prevent from being sold and retain for the use of Sketty school. We were certainly successful in that bid. It is important to have an open-door policy so that local representatives can go to the Welsh Office, as I did in regard to the land in Ty Coch. I saw the then Secretary of State for Wales, David Hunt, who was very receptive to what I, other local councillors and parents at the school had to say. I assume that in future there will continue to be delegations to the Secretary of State. Some local councillors will lobby the Secretary of State for Wales in regard to his lobbying the Treasury for the biggest possible settlement for Wales. There will also be local authority delegations to the leader of the assembly to ensure that there is no top-slicing and that each area gets as much money as possible. Clause 110 is disappointing in the extreme, especially in the light of the high goals for the relationship between the two tiers of government that were set out in the White Paper. On page 9, it refers to specific grants to local government in order to promote new initiatives … by providing funding which is not linked to specific services resulting in greater flexibility and discretion for local authorities. It also states that the assembly will gain the trust of the Welsh people only if it conducts its affairs openly and properly. On page 10, it has regard to the interests of local authorities, business, unions and the voluntary sector, and works in partnership with them to promote the economic, social and environmental well-being of Wales. On page 15 it says: The Assembly will promote and foster local government in Wales. It promises that both tiers of government will work together to serve the people of Wales. The Government promise to ensure that the Assembly regularly reviews with local government how effectively this commitment"— to fostering local government— is being observed. We have heard how local government in Wales has been overlooked. That, we are promised, will be replaced by mutual respect from the two bodies for their legitimate roles. After such a build-up, we were disappointed by the Bill. We want a more constructive approach to giving local authorities a proper role and establishing their relationship with the assembly. Some cynics—not me, obviously—might suggest that the Partnership Council was PC by name and PC by nature. It gives the appearance of fulfilling the White Paper contract, but on closer inspection it fails by a mile to deliver the goods. Clause 111 on voluntary organisations is less prescriptive, allowing the assembly to set up a scheme with complete flexibility, consulting the appropriate bodies. Clause 110 is more prescriptive. We do not want to delete subsection (1). We agree that a scheme needs to be put in place, but it must be real, not just lip service to creating something. There must be more substance. What do we see behind the ideal of an inclusive assembly and its balanced relationship with the local authorities in the clause and schedule 7? The assembly will make the Standing Orders. The assembly will set up the Partnership Council. The assembly will decide on the size of the Partnership Council. This is one area in which size counts. There are 22 county councils and county borough councils, as well as other bodies, such as national parks, the police and the fire services, that could be included.

Elfyn Llwyd (Plaid Cymru, Meirionnydd Nant Conwy)

Will the hon. Gentleman confirm that he will support my amendment, which would provide for one member from each unitary authority in Wales to be on the Partnership Council?

Nigel Evans (Conservative, Ribble Valley)

No, because our amendments go wider than the nationalist amendments. I would have a troublesome night if I went along with them. However, the hon. Gentleman has made an important point. We do not know the size of the Partnership Council. We know only that there will be equal representation between Members of the Assembly and representatives of other bodies. If the council had 40 members, there would be 20 from each. That would mean that not every local authority could send a representative. The council could be smaller than that—

Ron Davies (Labour, Caerphilly)

How about 44?

Nigel Evans (Conservative, Ribble Valley)

Or it could be larger, but even if there were 44 members, there would still be the police, the fire authorities, the national parks and other bodies to be considered. To give due regard to the regional nature of the Partnership Council, it would be useful if the Bill were more prescriptive. We would like an assurance for people from the regions that they will have representatives on it. The council is an advisory body, so there is nothing to fear. Local government is important throughout Wales, not just in certain parts. All the regions should be represented. Schedule 7 says: The Partnership Council must meet at least once a year. It is a vital body that will do so much for Wales, bringing the democratic system closer to the people, but the Bill says only that it should meet at least once a year. That is quite pathetic. If we are to set up such a body, I hope that it would meet a little more than once a year.

Elfyn Llwyd (Plaid Cymru, Meirionnydd Nant Conwy)

Will the hon. Gentleman therefore support amendment No. 471, which I tabled, which suggests that the Partnership Council meets three times a year at least?

Nigel Evans (Conservative, Ribble Valley)

If size is important, frequency is, too. Whereas three times a year would be three times better than the minimum proposed, the hon. Gentleman's amendment still does not go far enough for me. I react to the hon. Gentleman's question in the same way as somebody standing up in a law and order debate at a Conservative conference who says that he wishes to oppose the amendment because it does not go far enough.

Desmond Swayne (Conservative, New Forest West)

Would it not be preferable if, as the Opposition amendments state, the Partnership Council did not meet at all?

Nigel Evans (Conservative, Ribble Valley)

Well—[Interruption.] This is an important issue. As the Bill stands, it may be preferable for the Partnership Council not to meet at all. As far as I can see, there are no guarantees of how large the body will be or whether it will be all-inclusive and representative. The only thing proposed for it is in schedule 7: that it should meet at least once a year. That is not good enough. If we are setting up the body, we would hope to give it certain powers.

Ron Davies (Labour, Caerphilly)

Ah: "we".

Nigel Evans (Conservative, Ribble Valley)

I speak as one in this Parliament. We are certainly not opposing the advisory Partnership Council; we are saying that it should be improved. It is wonderful to have the Secretary of State in the Chamber for our proceedings. I am grateful that he is present for my speech. If he waits a moment and I am able to elaborate, he might even agree with me. I cannot recall his experience of local government. I am sure that it is longer than mine. I am sure that he also values the role of local authorities in Wales and will want to ensure that, if we are going to the trouble of including the proposal in the Bill, the organisation is meaningful. We have tabled our amendments in good faith so that the Minister may look at the issue again. Brilliant as our idea may be, he may wish to take it away, fine-tune it, bring it back and claim it as an idea of his own.

Nigel Evans (Conservative, Ribble Valley)

We are saying that, given the current drafting of the Bill, it would be better, as my hon. Friend the Member for New Forest, West (Mr. Swayne) said, if the body did not meet at all. We have tabled the amendments so that the Minister can consider something that will be constructive for local authority representatives, and so that a meaningful body can be established which represents people throughout Wales. If we are to give birth to the organisation, let us ensure that it is something of which the parents will be proud. Let us take the opportunity. A cynical view might be that, given the Bill, the assembly might not be seen by the Partnership Council as a body akin to heaven, which is how it has been described over the past few days and was described during the referendum campaign. We were led to believe that once the assembly was set up, the sun would always shine in Wales and there would be very few problems. Since the Partnership Council has been given the opportunity to advise the assembly and local government, as an offspring, it may at times be critical. Stipulating that it meets only once a year does not give it much authority.

Elfyn Llwyd (Plaid Cymru, Meirionnydd Nant Conwy)

How many times would it meet?

Nigel Evans (Conservative, Ribble Valley)

I hear what the hon. Gentleman says. If he waits just one moment, I shall refer to that point in my speech. I ask the Minister to look again at the matter and give the body a raison d'être. The new Partnership Council should contain a broad spectrum of local interests. The Secretary of State seems to be reacting to the phrase "raison d'être". It is French. I am talking about giving the assembly a real reason for existing. We have heard much about bilingual translation—I can do it myself. The Partnership Council should meet regularly. If it is to have a real opportunity to take on board the views of the local authorities—including the national parks, the police, the fire brigade and any other body that is deemed important enough under subsection (7)—it should meet at least once a month. It is especially important to Members of the Assembly who do not have local authority experience that there should be a fair exchange of views, particularly in the early years of the assembly.

Julie Morgan (Labour, Cardiff North)

Does not the hon. Gentleman realise that if the Partnership Council met once a month, it would meet more often than the full councils of some of the local authorities involved?

Nigel Evans (Conservative, Ribble Valley)

Not all local authorities have the same cycle. I suggested that the Partnership Council meet once a month, but there may be periods, such as in the summer or over Christmas, when it does not meet, so there might be as few as eight or 10 meetings a year. It is important that it meet more regularly than the rather fleeting suggestion in the Bill of at least once a year.

Desmond Swayne (Conservative, New Forest West)

Does my hon. Friend accept that the council's role is to establish and promote the relationship between the assembly and local government? That is a critical function; the council is not merely a liaison committee that may or may not meet once a month.

Nigel Evans (Conservative, Ribble Valley)

I find the attitude of Labour Members puzzling. All we have heard in Committee is the importance of the assembly to democracy. The White Paper, which was so influential during the referendum campaign, said that close links would be established between the assembly and local authorities, yet the Bill makes only fleeting reference to the Partnership Council and says that it should meet once a year. Many Labour Members have experience of local authorities, so I would expect them to want to ensure that the Partnership Council meets regularly to discuss common problems, so that there can be a better understanding of what the assembly and representatives of local authorities—in the wider context laid out in the Bill—want. If one of the objectives of creating this new tier of government is to bring democracy closer to the people, let us do just that and stop the window-dressing nonsense, which is nothing more than a sop to the Welsh people and an insult to local democracy.

Jackie Lawrence (Labour, Preseli Pembrokeshire)

I oppose the amendment and amendment No. 470. Unlike some hon. Members who have spoken this evening, I shall be brief. The amendment goes even further than amendment No. 469, in that it denies the very possibility of an equal partnership between the assembly and local government. The hon. Member for Ribble Valley (Mr. Evans) referred to democracy, which is fundamental to the Bill, but the amendment runs totally counter to it.

John Hayes (Conservative, South Holland and The Deepings)

The nature of partnership surely requires some definition of the expectations of the partners. My hon. Friend the Member for Ribble Valley (Mr. Evans) pointed out that it will be difficult to form a useful partnership when the size, nature and frequency of meetings of the body are ill defined.

Jackie Lawrence (Labour, Preseli Pembrokeshire)

Partnership is a coming together of equal partners, but amendment No. 355 would deny the possibility of bringing the partners together. Amendment No. 470 would extend membership and would make the Partnership Council unmanageable, thereby threatening its democratic role. I should like the Minister to address questions about national park representation, especially on planning matters, funding and environmental issues. Pembrokeshire has the highest density of population in a national park area, and specific concerns. Amendments Nos. 355 and 470 would affect the partnership of equals and the size of the body, and should therefore be rejected.

Edward Leigh (Conservative, Gainsborough)

At first sight, the Partnership Council appears to be a harmless proposal, but it is a talking shop for Members of the Assembly and local councillors. One might ask where the harm is in that. Well, after all the build-up in the White Paper, we might have hoped for more. The proposal is symptomatic of a gaping hole at the heart of the Bill and the proposals for a so-called National Assembly for Wales. We have heard so much recently about a constitutional revolution in our country, after various charter movements. That is not true for Wales, because the Bill is largely an administrative device: the proposal for a Partnership Council reveals that. Neither the Bill nor the Partnership Council will make any difference to the lives of the people in Wales. The Partnership Council proposal shows the true interests of those who are framing the legislation and those who will take part in the assembly. They love creating bureaucratic, interlocking mechanisms between local authorities, officers and councils. At best, those mechanisms are forums; at worst, they are more sinister, as we have seen in other parts of the country. As a glorified county council, the national assembly is perfect for such people. When politicians are desperate to create something but have no inspiration, they create a Partnership Council. Just as Maastricht created a forum of the regions—ftIoN. MEMBERS: "Ah!"1 That is a pointless talking shop, and the Partnership Council will be another. Clause 110(4)(a) provides that the Partnership Council would give advice to the Assembly". Why do we need yet another council to give advice to yet another assembly? How often will the council meet? The council will also make representations to the Assembly". Why cannot councillors make representations directly to the assembly? That has been done adequately in England, Wales and Scotland for many years. Why will Members of the Assembly be elected if not to make representations directly to local authorities and the general public?

Nigel Evans (Conservative, Ribble Valley)

A few major changes.

Edward Leigh (Conservative, Gainsborough)

The hon. Gentleman has not been long in the House if he thinks that I always agree with my hon. Friends on the Front Bench—I do occasionally have an independent point of view.

John Hayes (Conservative, South Holland and The Deepings)

My hon. Friend's point requires amplification. He is actually saying that local authorities that are represented on the Partnership Council may have access to the assembly to give advice or to offer comment, but, as my hon. Friend the Member for Ribble Valley (Mr. Evans) said, local authorities and the parts of Wales that are not represented will not have the ability to give that sort of advice. That is the inequality that the Partnership Council engenders.

Edward Leigh (Conservative, Gainsborough)

My hon. Friend makes a fair point, which was also made by my hon. Friend the Member for Ribble Valley (Mr. Evans), with whom I normally agree on everything. The trouble with bureaucratic mechanisms is that either one makes the thing so loose as to be meaningless in an attempt to include everybody, or one starts to exclude people. Clause 110(4)(c) states that the council can "give advice" to local authorities. Why should local authorities want to be lectured by yet another council? Are they incapable of running their own affairs? Of course, "partners" is a politically correct word. We no longer have spouses, husbands or wives with lifetime commitments—we have partners and sometimes rather odd ones. We have European partners and now we are to have a Partnership Council in Wales. Perhaps we should have Partnership Councils in England—but, on second thoughts, no thank you. At first, the whole concept of the Partnership Council seems entirely harmless, but it is bogus and symptomatic of the real problems within the Bill. Let us assume, for the sake of argument, that the Partnership Council actually means something—that it is a serious attempt to create powerful regional bulldozers in an unstoppable drive to establish real local and regional power. Let us assume that that is the case. We know it is not, because it is a sham, but if it was the case, it would be a serious step down the road to the break-up of the United Kingdom. The Partnership Council is, at best, a sham, a talking shop and a waste of time. The clause has been badly drafted, and the Committee should reject it.

Richard Livsey (Liberal Democrat, Brecon and Radnorshire)

We believe that it is absolutely right to have a Partnership Council. The hon. Member for Ribble Valley (Mr. Evans), in his own endearing and unique way, appears to be not only a Unionist, but an empire builder. The clause states that assembly must sustain and promote local Government in Wales which is very important. I, like the hon. Member for Preseli Pembrokeshire (Ms Lawrence), am concerned about representation of the national parks, and I hope that, because of national parks' functions in planning and other matters, they will be drawn into the Partnership Council. The other bodies listed—police and fire authorities—are also important. Amendment No. 470, which specifies that there should be one representative from each county, is extremely important and we would wish to support that amendment.

Win Griffiths (Labour, Bridgend)

The debate has been important, if only because it shows that the Conservative party is totally divided on this point—in fact, the hon. Member for Ribble Valley (Mr. Evans) appears to be totally divided within himself. At first, I thought his speech was constructed in a dream, but I then realised that it must have been a nightmare. He started by claiming that his concern in tabling an amendment to destroy the Partnership Council was to promote the interests of local government. Before he put his contribution together—if that is what actually happened—did he actually speak to any local government leader or councillor in Wales?

Nigel Evans (Conservative, Ribble Valley)

I was one.

The rest of the debate is in Hansard.