25/11/2015 The Wales Report


The programme discusses the chancellor's spending review and its impact on Wales. Presented by Huw Edwards.

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Tonight on the Wales Report, we're at Westminster


for a special programme on today's spending review.


We'll be looking at the Chancellor's measures and considering what they


And we'll be asking how the announcements here today affect


the debate ahead of next year's Assembly elections in Wales.


Good evening and welcome to The Wales Report.


We're at Westminster on a busy day - the Chancellor has


been outlining his spending review and updating MPs on the Government's


Secretary of State for Wales Stephen Crabb hailed the announcement as a


landmark for Wales. And remember, you can join


in the discussion on social media. But first,


my colleague Felicity Evans outlines how the Chancellor's announcements


may impact on Welsh communities. Statement, the Chancellor of the


Exchequer. George Osborne prepared this


spending review under pressure under his cuts to tax credits. A recent


defeat in the Lords had forced him back to the drawing board. Most


commentators predicted a compromise, they got a U-turn. I listened to the


concerns, I hear and understand them, and because I have been able


to announce today an improvement in the public finances the simplest


thing to do is avoid these changes altogether. The households in Wales


that receive tax credits are likely to be relieved that the cuts have


been cancelled. Mr Osborne says he can still reach his target of


cutting a total of ?12 billion from the welfare budget during the


Parliament. Despite the turnaround critics argue the UK Government's


spending plans continue to leave public services exposed. The Welsh


government said this does nothing to help public services in Wales, but


there were significant announcements on the way the Treasury calculates


the money the Treasury receives, the Barnett formula. In Cardiff Bay


there is a widespread conviction that the Barnett formula


short-changes Wales and there were calls to ameliorate that. Today Mr


Osborne agreed. Wales has asked for a public floor to protect public


spending and now within months of coming to office this Conservative


government is answering that call and providing that historic funding


guarantee for Wales. I announced today that we will introduce the new


funding floor and set it at 115%. While he was on the subject of


finding Mr Ob spawn confirmed that the block grant from the Treasury


for Wales will stand at almost ?50 million by 2020. It was 14.4 billion


this year. The Welsh finance minister says this amounts to a cut


in real terms. The UK Government once the Welsh government to raise


some of the money it spends by taking partial control of income tax


rates but the First Minister is wary of this because of his concerns over


fair funding. Today Mr Osborne not only committed to a funding floor


for Wales he also removed another barrier to the devolution of income


tax. No longer will a referendum be required for the Bush government to


take control. The Welsh government gave a cautious welcome to a funding


floor commitment but asked for clarity on how it will be permitted


and how reliable the promise will be in the long-term.


I'm joined tonight by Alun Cairns, Wales Office Minister


and Conservative MP for the Vale of Glamorgan, Nia Griffith, Shadow


Secretary of State for Wales and Labour MP for Llanelli, from the


Liberal Democrats, Baroness Jenny Randerson, and


I am bound to start with the biggest U-turn of the day, on tax credits.


We were told the logic for that was clear in the summer but suddenly


maybe it isn't. I think this demonstrates the strength of the


Chancellor, he is pragmatic tom he listens to the debate and he has the


authority to make changes according to the demands made on him. The


House of Lords threw back the changes and because of the difficult


decisions taken some time ago he had so much more freedom because the


revenue for the country is far better than it was even in July so


he was in a position where he didn't have to force through the tax credit


changes. All about Parliamentary arithmetic? It is about changing the


debate but also the better financial position we are rain because of the


difficult decisions over four or five years. I assume the opposition


welcomes the change. We have obviously run a strong campaign on


the opposition benches and we wanted to make sure working people didn't


miss out but the worrying thing is that he is still talking about


taking ?12 billion of money off the bubbly some of the very same people.


When Universal Credit comes in he is talking about taking money off


people there and when people transfer from one to the other we


also know there is difficulty with Universal Credit and I worry people


will miss out so I would like us to continue the campaign to make sure


that in future years we don't see the people who have been spared this


year miss out again later on. You are not quibbling with the fact that


there is still an impact on people with low pay surely, Alun? Universal


Credit is a fantastic success. It is changing the opportunities that


people have in terms of finding a fantastic success. It is changing


the opportunities that people have in terms of finding deployment. The


Universal Credit has been welcomed by charities, the independent sector


and employees because of the real difficulty it makes about making


work more attractive. -- employers. Welfare had to change, people were


trapped on benefits, that wasn't right, so the Universal Credit is


recognised widely as the way forward. I am just making the point


that today are lot of the headlines... It is misleading


because there are still changes in the pipeline which will affect


people's income. That is the consequence of benefit reform, that


is the changes proposed today, they are so much more positive and better


for those individuals. Universal Credit is transformational the


quicker we get people on to it the better because it will always make


sure work pays. Liz, your thoughts on today's change. There is now a


?4.4 billion hole in the welfare cuts and the Chancellor is committed


to those, and we don't know where that ?4.4 billion is going to land.


Even with tax credits, the level of earnings which were disregarded for


change within tax credits was previously within ?5,000, that has


gone down to ?2500, affecting people who work in seasonal industries.


What would the coalition have done about this, Jenny, if they were


still in existence? We would never have had the proposal for tax credit


cuts in the first place because we stopped that in coalition, said it


couldn't be done, we were totally opposed to cutting benefits for the


poorest, so it would have been a very different statement from that


point of view. We have lots to discuss, lots of content. Let's talk


specifically about our Welsh focus, this thought that income tax powers


could be devolved without going to a referendum. Does that make sense? If


the powers are there it is up to each individual party to put that in


their manifesto if they want to use those powers. First and foremost I


think we need a thorough impact assessment, let's have a look at


what actually would be the effect if we had a difference in rate one side


of the border and the other side. About 50% of people in Wales live


within commuting distance of the border so we need to look carefully


at that and I think parties would have to be very honest and upfront


about what they intended to do. You don't sound too enthusiastic. If you


look at the powers given to Scotland, they haven't used them in


the time they have had them there and we may find there is good reason


for that. Liz, your thoughts. This has been our policy all along and we


delighted to see it being adopted. Northern Ireland is a different


context but it is now on the cards for the other nations of Britain and


we need to look at the wider fiscal arrangements for Wales. If somebody


on the doorstep says this is a very big thing to do, we should have a


voice in a separate vote in a referendum on this. Shouldn't this


be the fair and just thing to do? We have had referendums in the past in


the Welsh assembly and we are now in a position where we can move ahead


with this and it is quite an easy case to argue. The level of answer


ability is very much improved and we need that to revitalise politics in


Wales. Nia, do you think this kind of major devolution of power should


happen? There are other ways the public can express their opinions,


we have elections. Lots of issues get mixed up there, the whole point


of a referendum is to focus on one thing. Yes, but the important thing


is that people need to be upfront about their proposals and the public


can decide. You are comfortable this can happen without a referendum?


Yes. Jenny? I am delighted the idea of a referendum has been dropped


because we have had several referendums and the people of Wales


want the Assembly to have additional powers. It is not a good idea to


have the potential for a power like this to be hanging around in the


ether. It is time now for the parties to be putting forward in


their manifesto is what they would do on income tax powers specifically


and this gives the opportunity for parties to put forward and our


leader in Wales, Kirsty Williams, has put forward the idea that we


should be looking at reducing income tax in Wales as part of a way to


stimulate the economy. That is a fascinating perspective. I will come


to the lower tax thing in a moment. The referendum first, if somebody in


your constituency comes up and says, hang on, this is a big thing we are


doing, I would rather have a say in a referendum, you will say hard


luck? They can vote for a party that makes various proposals on tax


changes. This allows me to stand on a platform with my Conservative


colleagues calling for tax cuts in Wales, but it is easy to have a


spending body armour something that just distributes money. It now


changes the responsibility whereby the Welsh government, if they want


to spend more money, can have the opportunity to raise that money and


it makes it far more directly accountable to the people who vote


for it. I think this is a great chance to attract investment,


entrepreneurs, business people. What a great thing it would be if we had


a lower rate tax in Wales. -- rate of income tax. If you are facing a


party that portrays itself as a tax-cutting party, how will Labour


respond? I think this is a similar move, he


will cut and cut and cut centrally then make it more and more difficult


for people to deliver services, whether at the Welsh Government


level or the local authority level, and therefore he will be throwing


out to them the question of whether they need to raise taxes in order to


make up for that shortfall which he is putting into the budget in the


first place. So I am very worried because I do think it is the


mechanism he may be trying to use across the UK in order to, if you


like, pushed down the way taxes are collected, and people will find


themselves perhaps having to pay more in the same way they have had


to pay more VAT. The Welsh Government regularly calls for


additional spending in Wales. If they want that they can now raise


the tax... Precisely... But they will have to justify to people.


Every business and organisation and family must make savings, it is easy


to spend. They will now have to look voters in the eye and say, we are


spending more on this project but raising tax because of it. People


will judge accordingly. So you are proposing that Welsh taxpayers


should pay more because the Chancellor cuts the block grant.


That is affecting what you are saying -- effectively. Absolutely


not. We have associated tax varying powers with a funding floor which


will guarantee funding for Wales and the longer terms as with the


independent Silk Commission recommended. The independent expert


who looked at the funding recommended it and he said it is


very fair for Wales, and I would take his word over the Welsh


Government. It doesn't alter the fact that we will still see cuts


throughout this Parliament through the budget the Welsh Government. You


mentioned the funding floor, many viewers will know about it, but some


understandably will not be into the detail. What does it mean, Alun,


what does it offer the Welsh Government? Many have expressed


concerns over many years that the way the Barnett For Miller works for


Wales does not always advantage Wales over other parts of the UK --


formula. Arrange was set between ?114 - ?117 to be spent in Wales


according to ?100 spent in England because it is based on need. So it


is in that range. The floor is forward hundred and ?15 to be spent


in Wales compared to 100 pounds in England. In the 1990s we were in the


realms of 125% which was consistent, and what is worrying here is that if


we are looking at a needs -based assessment, the needs of Wales don't


always compare, they won't track the needs of England. But on the figure


of 115, to get back to specifics, Gerry Holt is saying... Are you


saying it is not fair? Going back, what's bad, I said to the 90s, 15


years or more, it was averaging 125% then. A lot has changed since then.


It drops to 116 when Wales were -- Labour were in power, it could have


been addressed then and is now 111%. 115 is an improvement but the


question is does that reflect the needs? The Welsh economy was doing


better when it was 125 than it is now. Gerry Holden will recognise the


need and he said 114-117. I am delighted because the funding for


what was something the Liberal Democrats fought for when we are in


the coalition, the promise was made in coalition that this would be


introduced. I am so pleased to see it. Are you happy with the figure?


It is in the range Gerry Houlton spoke about, that he recommended,


and Plaid Cymru have not argued before the recommendations. I think


there is possibly a case for getting him to make sure and double check


and all the rest of it, but the point is, this is the Welsh


Government's initiative that is being put into place now. Nia, on


the figure, are you prepared to say tonight you are satisfied with


that? That is the level the Welsh Government has sought and which has


been put forward, so in terms of the level of that floor, we are happy


with it. We are not happy with the continuing cuts, which there will


be, to the Welsh block grant anyway, and also the money sucked out of the


economy in Wales through all the different tax changes there have


been up till now, and those we anticipate in the remainder of this


government, which will suck money from the local economies, the high


streets, which will have an impact... What is happening to the


block grant for Wales? On a capital bases it will go up nearly 70%,


which is quite transformational, we haven't seen that increasing many


years, so money the Welsh Government will have at its disposal for


capital projects, roads, schools, that really is quite


transformational. Adding capital and revenue Wales is in a much stronger


position as a result. Some departments across Whitehall face


cuts of 25%, that region. Wales's position is much stronger than


those. Nia, your point? Capital funding over expenditure is less


than revenue and the overall effect of the cuts as I understand it will


be at least 3.5% of cuts to come. Wiping out, do you mean? The overall


effect of cuts to the budget will be 3.5%, so if you think of the cuts


they have already been and remember that the money the Welsh Government


Spens is almost entirely on front line services, then these cuts that


will be additional will have another significant impact. Jenny. In fact,


in Wales the cuts will be proportionally less than for some of


the departments, because the situation in Wales is reflected, the


health budget, the education budget, and I noticed the culture budget as


well, very small, but those are protected, and therefore, I think it


is time the Welsh government stop complaining and made the best of the


situation in terms of making their spending a great deal more efficient


than it has been until now. Is that a fair point? Everyone needs to make


savings, but the resources they have at their disposal a significant,


both capital and revenue. Ally that then with their borrowing powers as


well as tax varying powers, but in addition to these, there is the


Cardiff city deal, which will bring more money over and above Barnett,


the formula, to Cardiff, to make the city more productive, there is


electric and to Swansea, all this money is in addition to the normal


black grant -- block grant. The resources being made available to


Wales for XE any expectation any political party had a short time


ago. Could the Minister clarify how much money the Cardiff city deal


will get because we haven't heard that. The Welsh Government has asked


for match funding. On electrification can we have more


clarity on when it will happen? We have heard this announcement


repeatedly and we would like to see action. We have certainly heard it


several times on electrification because some of us do that Jenny a


lot! Let's go to the Cardiff city deal first, how much money going


into that -- do that journey a lot. We have an in principle commitment


to being the structure part of the deal, only two weeks ago we had


below growth of the deal, only two weeks ago we had below grow 30 bids


but this agreement from the Treasury in principle now throws the onus


back to the businesses and the Welsh Government to further details. We


would have liked to have been further forward because we


originally wanted the deal in July but it took until a fortnight ago to


get it. We will do that in detail but we have in principle agreement


which is significant because that then paves the way to the upgrades


of the Valley lines, the metro around South Wales, this is all in


addition to the block grant Wales gets, so this is a pretty landmark


deal we have announced today. Are you convinced, Liz? We are not


seeing electrification in North Wales, there are debates about it.


There are also cuts another Westminster department. The Courts


estate is to be reduced, HMRC is centralising all services in Cardiff


which will affect the rest of the economy, those areas, and we are


talking about hundreds of jobs here, with the courts we are talking about


an ongoing affect particularly in general areas where services are


being drawn out and it will have a terrible effect on the local


economy. Alun? The modernisation of railway of the North Wales, I am


ambitious about, I was there two weeks ago with the Welsh Government


and the transport minister. We need to do develop that with local


authorities. I am excited. The window for that bid is next year. We


will make a bid to upgrade the railway lines in North Wales. The


other areas, of course, every government needs to make savings and


look carefully at how it spends, because we need to get more for


less, and that is what the UK Government has done. I think there


is a big responsibility on the Welsh Government to follow suit just like


every other business. The tax is interesting because some people


argue there are special circumstances around some Welsh tax


offices not least because they provide different services to other


parts of the UK. Have you protected that enough or are you going along


with Whitehall? We have looked closely at it and there is the Welsh


language provision we need to preserve, the Welsh language scheme


which we are committed to delivering on, but there is the digitisation of


HMRC services, of the Courts service, which will provide the


opportunity for a much better service either through the Welsh


language or communities. Many people already complain about the tax


revenue system. In order to improve it, we need to make changes, but


there is a net gain for Wales out of that, at potentially 600 extra jobs


in Wales as a result. A and we will move on. Thereat areas in Wales were


digital sizes and doesn't work because some areas cannot have good


broadband. I am worried about using digital technology to access


justice. We don't know the effects of that, if you are a witness alone


with the court in another place what will the outcome be? I think we are


rushing without knowing where it will lead. We have a few minutes


left, looking ahead, I noticed many months, but the assembly elections


next year. A thought from each of you as to what you think will


dominate the campaign for the months ahead? Clearly today's statement


could have a" Don that campaign. I would start with the minister, what


you think it will be about? I think it will be about tax cuts or


increases for any party but I know my party will propose tax cuts in


that manifesto and people will have a choice, you either want to live


and work in Wales and pay less tax or go with some of the other parties


because they always promised to spend more money in certain areas


but now they will have the opportunity to raise it but justify


that to voters. Jenny? We have got this far without mentioning the


Wales Bill which is going through Parliament, and as it goes on its


process, I am sure there will be a lot of discussion about the


additional powers we hope will come to the Welsh Assembly, and what I


would like to see is a debate that concentrates not on those powers but


on what each individual party will do with those additional powers,


because that is what people care about. Indeed, and we have spent a


long time discussing that bill. Two-day's context, Nia, what does it


tell you about what lies ahead? Jenny mentioned the Wales Bill but


today's measures change nature of the bill, don't they? To a certain


extent but next year people book will be looking for a government


that wants to put growth in high-tech industries and strategic


support for industries to when sure we keep high-quality jobs in Wales


and support industry, make sure procurement uses locally sourced


goods, and that is a strong economic platform, which people will look


for, they will be looking for a genuine understanding of what makes


jobs grow in Wales and how we can do that. Liz? Plaid Cymru will keep the


money coming to Wales for health ring fenced for health in Wales. I


would also like to remind the Welsh Tories that their manifesto in 2015


promised to protect the funding for S4 C and now we are seeing a cut. It


is unique to Wales and needs to be protected. That is another programme


entirely which we will come back to, an important issue, but thank you


very much for coming in. Good of you to come this evening.


We'll be back next week with a special programme with


And if you'd like to be in the audience and get the chance


to put your questions to the First Minister, get in touch - the e-mail


or we're on social media - the hashtag is #thewalesreport.


Diolch am eich cwmni, nos da, good night.


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