25/11/2015 The Wales Report

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.