Welsh Affairs Committee
Oral evidence: Responsibilities of the Secretary of State for Wales, HC 219
Wednesday 2 November 2022
Ordered by the House of Commons to be published on 2 November 2022.
Members present: Stephen Crabb (Chair); Simon Baynes; Virginia Crosbie; Wayne David; Geraint Davies; Ben Lake; Rob Roberts; Beth Winter.
Questions 490-559
Witnesses
I: David T. C. Davies MP, Secretary of State for Wales, and Dr James Davies MP, Parliamentary Under-Secretary of State for Wales.
Witnesses: David T. C. Davies MP and Dr James Davies MP.
Q490 Chair: Good morning. Welcome to this session of the Welsh Affairs Committee in Committee Room 16. I am delighted to welcome this morning a former Chairman of this Committee and now the new Secretary of State for Wales, the right hon. David T. C. Davies. Welcome to you, and to your colleague Dr James Davies, the Under-Secretary of State—very recently appointed to the Wales Office. Congratulations to you both. We are delighted that you have given us your time this morning, so soon into your time in office.
Because we have a lot of ground to cover this morning, I implore you both, and my colleagues asking questions, to keep our remarks succinct and to the point. Could I ask you to briefly outline your priorities as the new Secretary of State? What do you want to achieve in your time at Gwydyr House?
David T. C. Davies: Bore da, Cadeirydd, a diolch yn fawr iawn am y gwahoddiad i ddod yma heddiw. [Translation: Good morning, Chairman, and thank you very much indeed for the invitation to come here today.] Thank you very much. It was very important to us that we took up the invitation, even though it was rather soon after we were both appointed. In very simple and brief terms, in my role as Secretary of State for Wales I hope to ensure that Wales has a very strong voice around the Cabinet table and that the rest of Government are fully aware of the needs of Wales. I want to make sure that we get as much investment and create as many jobs as possible. I am very enthusiastic about a couple of big potential projects that could come to Wales, about which I am sure we are going to be asked later, but essentially it is to make sure that Wales has a strong voice in Government, and that Wales is aware of the enormous commitment that the UK Government have towards Wales, and its importance within the Union.
Q491 Chair: Did the Prime Minister give you a particular mission? Did he say, “David, I want you to go out and do x, y or z?”
David T. C. Davies: The Prime Minister emphasised to all of us how important it was to display professionalism at all times. He certainly said to me that it was important that we develop a good and positive relationship with the Welsh Government. I was very pleased that, I think the day after I was appointed, I was able to talk briefly to Mark Drakeford online in respect of another meeting, and I am looking forward to having a proper one-to-one conversation with him today.
Q492 Chair: Do you think that the essential role of the Wales Office will continue as it has been? Is there any reason for us to suspect that there might be a difference in direction, in terms of the role that you want to play as the Secretary of State, with a seat at the Cabinet table, and as a bit of a bridge into the Welsh Government? You have previously done the Under-Secretary job, and you have sat in this chair as Chairman of the Welsh Affairs Committee. Do you think that the role of the Wales Office is recognised, established and therefore permanent?
David T. C. Davies: I think there are two ways to answer that, Chairman. You and I have both been in Parliament for 17 years, so we will have seen changes taking place, and you do not always notice them day to day. Obviously, those changes will continue, but I get the feeling that your question might be hinting at whether there is some suggestion that all the territorial offices be rolled into one, which is an idea that seems to raise its head every couple of years. If that was the question, I do not see that happening. I think that it is vital that the territorial offices remain in place, and that Wales, Scotland and Northern Ireland have their guaranteed place around the Cabinet table. Obviously, there will be minor changes as there always are, but I do not foresee a substantial change.
Q493 Chair: Okay, that is helpful. Dr Davies, I do not know whether you have had time between the two of you, and with your officials, to work out different portfolios within the Wales Office. Dr Davies, are you able to give the Committee a sense of what your priorities will be?
Dr James Davies: Diolch yn fawr, Cadeirydd. It is good to be back at the Welsh Affairs Committee, having been a member between 2015 and 2017, and it is a huge honour to have been made the Under-Secretary of State. I have a steep learning curve, clearly. We have had preliminary discussions about how various topics might be divided up, which will need to be approved at high levels, but I see myself very much as supporting the Secretary of State and trying to be proactive in flying the flag for Wales at the UK Government level.
Q494 Chair: Fabulous, thank you. Perhaps we can get into some specific issues now. Can I ask about freeports and investment zones? When Liz Truss was Prime Minister, one of the new ideas that emerged was investment zones. It was not entirely clear to me, and I think perhaps to other colleagues in the House, whether investment zones were to replace, displace or be welded on to freeports. Secretary of State, can you give us a sense of whether this idea has now been dropped? Are we back to the pure freeport idea that was in the manifesto in 2019? How should we see this area of policy and what implications does it have for Wales specifically?
David T. C. Davies: As you will be aware, the UK Government have provided up to £26 million to get a freeport up and running in Wales. Bids are in at the moment. The bidding process is open until 24 November, and we all look forward with great interest to see what will happen there. That is going ahead. It seemed that there was a bit of a delay in terms of discussions with the Welsh Government, but that has all been resolved now and it is moving ahead very well. The Welsh Government recognise the potential for jobs and investment from having a freeport—an area where a slightly different tax regime will apply. The general idea is that things can be imported and tax is not paid until they are taken out of the freeport zone, so manufacturing can take place. If things are going back out again, it creates jobs and investment for the area. That is the principle of a freeport.
An investment zone works in a similar way, but with further freedoms perhaps in terms of taxes and planning. The question you really ask is whether that is still going ahead. As far as I am aware, the answer is yes. I have heard reports that it might be being reviewed at the moment, but I have not been given any official reason to think that they are not going ahead.
Q495 Chair: Okay. But from what you are saying, even if it is going ahead, in terms of what is being delivered in Wales, it very much is the standard freeport concept that we had been looking at previously.
David T. C. Davies: The bids are going in at the moment. The Government are taking a flexible approach, and they have even said that there might be room for more than one freeport if there is a high number of excellent bids. Flexibility is the key. I am just setting out the general principle, and something similar could apply to investment zones, but to be fair, there is a new Government in place, and I am sure that the relevant Cabinet Minister will want to look at all sorts of things before moving ahead with them.
My focus is very much on bringing a freeport, and perhaps even more than one freeport, to fruition as soon as possible. Once I have more information about how the Government want to take forward investment zones, I certainly hope we could work with Welsh Government to develop that in Wales. We have already seen the success of the Deeside industrial area. I have visited it on a number of occasions as the Wales Office Minister, and we have seen what a huge success that has been for the north Wales economy. If we could replicate that, I would be very positive about it.
Q496 Chair: Brilliant; thank you very much. Last week we had a session on the economic potential of floating offshore wind in the Celtic sea and how that relates to the Welsh economy. We had a number of industry leaders in front of us—all of them, really—including the Crown Estate and the UK Government’s own offshore wind champion, Tim Pick, and they all seemed to be singing from the same hymn sheet, talking up the economic opportunity for Wales. Indeed, Henrik Pedersen, the chief executive of Associated British Ports, which owns Port Talbot, talked about this being a “once-in-a-generation” economic opportunity for Wales. Is that view shared by you, Secretary of State? Do you recognise this as a big prize to go out and seize for Wales?
David T. C. Davies: Absolutely, Mr Chairman. You will be aware that I have visited the Pembroke Dock area to look at similar infrastructure; I believe you were present on one of those visits. I think it is an enormous and very exciting opportunity for us. I could probably eat up 10 or 15 minutes talking about my enthusiasm for that.
We need every single gigawatt-hour of electricity we can get that is produced within this country. There are five potential zones out there in the Celtic sea. One of the first things I have done already as Secretary of State is meet the Crown Estate to see how much more quickly we can get a bidding process up and running for those five areas, and they are also enthused about it. The simple answer to your question is: yes, I am enthusiastic. I have already undertaken some work on that, and I look forward to visiting again in the near future.
Q497 Chair: Fabulous; that is really encouraging to hear. Your officials hopefully followed last week’s session, where numerous witnesses talked up the importance of the freeport concept to help deliver some of these economic opportunities and ensure that there is real economic value held in Wales from doing floating offshore wind at an industrial scale.
I have one more specific question before I bring in my colleagues, and it relates to the Newport Wafer Fab business. You will be aware that the UK Government previously announced a review, given national security concerns around the purchase of Newport Wafer Fab. The decision following the review has been delayed about three times. Are you able to give the Committee an idea of why a decision keeps being delayed?
David T. C. Davies: What I can say to you is that I am well aware of the issues around this, and I have had a number of briefings on it, but obviously there is a national security issue here, and the advice I have had is not to comment further on it but to say that it is being very carefully looked at at the moment by Government.
Q498 Chair: Thank you. In terms of the representations we have received, there is a strong concern about the workforce and the uncertainty that is hanging over the workforce in that facility in Newport. It would be remiss of me not to ask you whether you are aware of the feelings of the workforce at the moment and their desire to get some certainty and clarity on the future of the facility.
David T. C. Davies: I am fully aware of that. I know that there are 200 jobs at risk.[1] Some of the people working there are my constituents, so as a constituency MP, I have been contacted by some of them and also by the union. I am absolutely aware of it. Nobody wants to see any jobs being lost anywhere, but the process that has taken place has arisen because of national security concerns, and I can confirm that I have had briefings about that and have been advised not to say anything further.
Q499 Chair: I understand that. As a Committee, we are not in a position to make judgments about the information that will be feeding into the national security side of it, but we would probably want to see the issue resolved as efficiently and as quickly as possible.
David T. C. Davies: I share your concern about the jobs, and I have made that known.
Chair: Thank you very much. Geraint, on this issue.
Q500 Geraint Davies: Would you accept, other than the security issue, that this is a strategic global economic asset that the Government should be investing in to grow our economy, as opposed to people feeling, “Oh, my job might be at risk.”? We should be going in there and investing, and securing it for Britain. Isn’t that your position?
David T. C. Davies: I can confirm that, obviously, compound semi-conductors are a very strategic asset, and the Government are very well aware of that. I would agree completely. The ability to produce compound semi-conductors is vital from a strategic perspective, yes.[2]
Q501 Simon Baynes: Thank you, Secretary of State, and thank you, Minister, for giving us your time this morning. I am particularly pleased to see that we now have what I think is the correct balance in the ministerial team, which is representation from north Wales and south Wales. Sorry to put it in that order, but as a north Wales MP I feel strongly about this. I feel that north Wales is perpetually under-represented and under-appreciated in the overall system of Wales, so would you both, as a general point on which to start, comment on ways in which you would want to ensure that north Wales gets its fair share of attention and benefits within Wales overall?
David T. C. Davies: I feel I should hand over to my colleague.
Dr James Davies: Thank you, Simon, for your welcome. Clearly, I am a Minister for the whole of Wales, and that must not be forgotten, but equally, as a north Wales MP, as you are, I have my own thoughts about opportunities and risks for the region. For instance, when it comes to transport infrastructure, you and I know how important that is to north Wales, and we know the importance of plugging into Warrington and Crewe in terms of rail.
We also know about opportunities for energy, such as the nuclear industry and Ynys Môn and Trawsfynydd, as well as possibilities for additional wind power. Clearly, the Celtic sea has the floating wind opportunity in south-west Wales, but in north Wales we have a 20-year history of wind power, with more, as you know, being put out at sea. I want to make the most of that and to look at tidal opportunities as well, which are very interesting to me. There is also the general levelling-up agenda and ensuring that our communities and seaside towns see the benefit of the Government’s agenda.
Q502 Simon Baynes: Thank you for that. It leads neatly into my second question, which is about transport. My understanding is that the Avanti West Coast franchise has been extended by the UK Government until April 2023, unless I am much mistaken. Clearly, there are many problems with the performance of Avanti West Coast within Wales. Would you comment on how you see that situation and the degree to which you, as the Wales Office, are putting pressure on the Department for Transport to take a long, hard look at the underperformance of the franchise?
David T. C. Davies: If I may, Mr Baynes, the issue was raised in questions to the Wales Office approximately a week ago. We had already been in touch with the Department for Transport. My understanding is that it acknowledges that there have been a number of complaints—I certainly am well aware of them—and that, although the franchise has been extended, it is looking very carefully at the levels of service being offered. If you would like, Mr Baynes, I am happy to get confirmation of that from officials, but the complaints—the many complaints—have certainly been noted by DfT.
Q503 Simon Baynes: Okay, thank you. Transport for Wales made two bids to the Union connectivity fund, which sought to improve journey times on the south Wales main line and enhance infrastructure in the Chester/Cheshire area. What discussions has the Wales Office had with the Treasury about the decision to decline both these bids?
Dr James Davies: In actual fact, I am not certain that they have been declined. This is an ongoing process and, as I understand it, those bids are very complementary to other work that has been ongoing. Certainly, the Secretary of State and I have work to do to speak to DfT and ensure that, wherever possible, work is progressed on plans such as those that you highlight.
David T. C. Davies: Just to confirm, I do not think those bids have been refused at all. There is an ongoing discussion about them, and an announcement will be made in due course.
Q504 Simon Baynes: Excellent. Rail infrastructure, or part of it, is a reserved competence. I speak parochially as somebody seeking step-free access at Ruabon station in my constituency, but there is a broader point. From the Committee’s point of view, it is important that the Wales Office applies pressure, wherever possible, on the Department for Transport to come through with the funding and support. I used an example from my constituency, but I know of many other such projects across Wales. Could you comment on that in general, and on how you interact with other Government Departments to ensure that we get the best deal possible for Wales?
David T. C. Davies: I feel that there might be a number of slightly different questions there. In respect of step-free access, my understanding—I do not have this in front of me—is that that is coming out of a separate fund, and that Wales has been given various awards. I believe Abergavenny had one recently. While there was input from me as the local MP, each of those bids has to be assessed on transparent criteria.
On the overall point about spending on rail infrastructure, the UK Government will spend £340 million on it during this control period. Obviously, the improvements taking place that are not part of that £340 million will still improve services for Welsh passengers, such as the work taking place in Gloucester, which will have a hugely beneficial impact for travellers from south Wales to the midlands.
The third part of your question is about our interaction. When I was the Minister in the Wales Office, I had regular meetings with DfT Ministers—the former Rail Minister and others—and I would certainly expect that to continue.
Q505 Simon Baynes: Two final questions. In north Wales, the cross-border aspect of our lives, economically and otherwise, is vital. There is the Mersey Dee Alliance and so on. To what extent can more work be done to build links across the border? I think I am right in saying that about 25% of people in Wales go across the border each day to a job in England.
David T. C. Davies: Perhaps I will bring in my colleague in a minute. First of all, I have had a number of meetings with the Mersey Dee Alliance, and I am happy to continue that relationship. Obviously, I met the North Wales Growth Board and Ambition North Wales on a number of occasions, and I hope that that will also continue.
As you will know, Mr Baynes, there is a potential project in the RNEP to make improvements on the north Wales coastline. Although I do not want to presume what questions may be asked, I suspect that HS2 may come up at some point this session. Of course, HS2 will improve journey times to London from Crewe, which will also be beneficial to passengers in north Wales. Perhaps I can bring in my colleague.
Dr James Davies: This matter is critical, as you know, to the region as a whole. I will now have to relinquish my chairmanship of the APPG that oversees this; perhaps you could take it over, Simon—that would be a positive for the region.
The rail agenda is so important, as you know. I mentioned Warrington and Crewe. Warrington is where north Wales would link up with Northern Powerhouse Rail and northbound HS2; it is Crewe for southbound HS2. Beyond that, there is the issue of regional services. The fact that, effectively, you cannot use the train to get to Manchester and Liverpool from north Wales—it takes much longer than driving—is a real problem. That is holding back opportunities for my constituents and yours. That is absolutely critical.
Much of the infrastructure work that needs to take place is not necessarily in Wales. There are bottlenecks at Chester station, for instance. Electrification clearly needs to come through from Crewe and Warrington as well; it is absolutely critical. Merely understanding that is a good start, in terms of liaising with Government and other bodies.
Q506 Simon Baynes: Thank you. My time is almost up but, I have one quick last question that you can give a quick answer to. Obviously, we have a new Administration under the Prime Minister. Could you please confirm unequivocally the commitment of the UK Government to levelling up? That is vital. I think only one substantial bid for money from the levelling-up fund has been granted in north Wales; it happens to be from my constituency. Many people across Wales are badly in need of such funds. Could you please confirm that the Government remain as committed as they were a few months ago to the levelling-up agenda?
David T. C. Davies: Yes.
Simon Baynes: Thank you.
Chair: Beautifully succinct.
Q507 Ben Lake: Thank you, Chair. Diolch yn fawr iawn i’r Ysgrifennydd Gwladol a’r Gweindiog. [Translation: Thank you very much indeed to the Secretary of State and the Minister.] Secretary of State, you mentioned to the Chair that the Prime Minister expressed the desire to create a positive relationship with the Welsh Government. Quite simply, how do you envision going about fostering such a relationship?
David T. C. Davies: Mr. Lake, as you know, for the last three years I have served as a Minister in the Wales Office. During that time, I have had numerous meetings with Welsh Government Ministers, many to do with covid. As the Minister responsible for growth deals, I also had a lot of personal meetings with Ministers—mainly Vaughan Gethin; sometimes others; and, when we were on growth deal visits, Mark Drakeford.
At a personal level, there has never been any difficulty in our relationships at all. When it comes to growth deals, we are all on the same side. We all want that investment, and we want them to succeed. I do not see anything changing. I spoke to Mark Drakeford a couple of days ago, and will be talking to him later. One of the first things that we did was try to set that call up. Obviously, he has a very busy diary, so I think this was the first time that he was available.
Q508 Ben Lake: The Welsh Government have, however, complained recently about lack of engagement on a number of UK Bills. How can those sorts of concerns be addressed? Do you envision any circumstances in which certain UK Ministers in other Departments will need to foster a direct relationship with their counterparts in the Welsh Government?
David T. C. Davies: I think there have always been direct relationships between the Welsh Government and other UK Secretaries of State. I know that at official level, a great deal of work goes on. Clearly, there have been a number of Bills—I think eight or 10—in which LCMs were involved. The co-operation continues reasonably well, I think.
There will always be tensions; I picked that up. I read things in the press. It is to be expected that a left-wing Government in coalition with those in favour of independence might occasionally have a slightly different view from a moderate centre-right Government in Westminster. At the personal level, we are all professionals and we all have a shared interest. I very much hope that will continue. All the conversations that I have had with Mark Drakeford over three years have been perfectly warm and professional. I do not think I have ever fallen out with any Welsh Government Minister directly. I look forward to that continuing.
Q509 Ben Lake: What sort of role do you envision the Inter-ministerial Standing Committee and the Finance Inter-ministerial Standing Committee serving in future?
David T. C. Davies: Those committees are already in place, and I do not know of any plans to change them. Over the last few years, I took part in a lot of those committee meetings. Basically, they were all online because of covid, and I often sat in for the Secretary of State when he was doing other things. We have a new Government who may make a few changes here and there, although I am not aware of any. I think you can tell a lot from the fact that one of the first things that the new Prime Minister did was telephone Mark Drakeford and Nicola Sturgeon. As I say, it is no secret. He said to me, “I want a good, professional and positive relationship with the devolved Administrations.” I very much doubt that any of these committees will be torn up or rejigged in a way that will not be appreciated by the Welsh Government. That is very much not the way the Prime Minister wants to go about things.
Q510 Ben Lake: In the past, have these committee meetings been an opportunity to discuss legislation at UK level that perhaps the Welsh Government—
David T. C. Davies: Yes, absolutely. I have taken part in a number of the agricultural ones. In some of the discussions, some comments made by Welsh Government Ministers were not entirely supportive of what the UK Government were doing, but that’s politics. At least there is the opportunity on those committees to express disagreement. I am sure that it will not surprise you, Mr Lake, to hear that disagreement has occasionally—or perhaps regularly—been expressed, but it can be discussed in an open way on those committees.
Q511 Ben Lake: So if the Welsh Government refused to give consent to certain parts of a piece of legislation, you would not necessarily consider that a failure of relationship, but perhaps more a function of politics.
David T. C. Davies: Not necessarily. If you take something like the UKIM Bill, I think the UK Government felt that one could argue that if the legislation had not been carried forward, the Welsh Government would have effectively been able to block important trade Bills, which are very much a reserved matter. At all times, the UK Government will look to work with the Welsh Government in order to reach agreement without needing to legislate and without LCMs, and will show proper respect to the democratically elected body.
Q512 Ben Lake: I was heartened to hear in your opening remarks that you want to be Wales’s voice in the Cabinet, and to ensure that Wales’s needs and interests are understood across Government. Have there been any difficulties in the past with other Departments not necessarily appreciating some of the specific circumstances that Wales finds itself in? There have, of course, been many concerns expressed in the past, but sometimes the devolution settlement is not well understood, and that can have an impact on decisions made in Whitehall. Do you consider your role to be partly educating other Departments about the intricacies of the devolution settlement, as well as championing Wales’s interests?
David T. C. Davies: I can’t think of a specific instance off the top of my head but, to be honest with you, I think that probably would have happened. It is bound to happen that people will not always be aware of the specific cultural differences that arise in Wales over things such as language. I suppose that I concur with you that part of the role of the Wales Office will be educating. I have always sought to meet Ministers from DCMS quickly to explain the importance of S4C and its role in fostering the Welsh language. While I haven’t done that in the last week, I can assure you that it will be a priority, as well as an example.
Q513 Ben Lake: You touched on growth deals. What is your understanding of the situation regarding the mid-Wales growth deal? Could you say whether progress is satisfactory or otherwise?
David T. C. Davies: That is a very good question because, obviously, in the other three growth deal areas, projects are up and running and are being developed. We are not quite there yet with the mid and west Wales growth deal, and I think that getting there needs to be a priority for me and my colleague here. It is fair to say that perhaps we are not quite where we want to be yet in mid and west Wales on growth deals.
Q514 Ben Lake: Has progress changed at all since the local elections this year? Have you found any changes in the dynamics? Obviously, there is regime change in Powys.
David T. C. Davies: I suppose it is fair to say that any new set of councillors coming in will have their own priorities, and a lot of work. I have not seen a change. My colleague will want to talk to both the local authority leaders about how we can support them in bringing projects forward quickly. Perhaps, Mr Lake, you will have a role in this as well. The last time I came down to visit your local authority leader, you very kindly took me to one or two places, so I would highly recommend a visit for my colleague, if he gets the opportunity.
Ben Lake: Very well.
Dr James Davies: I am advised that the Growing Mid Wales board recommended in September that six projects should proceed to an outline business case stage. The projects include a green innovation park in Aberystwyth and a bespoke tourist facility in the Elan Valley, and at least two projects should be delivered by summer 2023. That is the ambition.
Ben Lake: Thank you. That is good to hear—and the invitation stands.
Q515 Geraint Davies: Welcome, Secretary of State. I was very pleased that you said you would be a strong voice for Wales in Government and that you aim to get as much investment in jobs as you can. With that in mind, you might be aware of the alerts from the vice-chancellor at Swansea University, Paul Boyle, about the loss of 50 projects and 270 jobs because of the cliff-edge loss of European structural funding. Those jobs are very important for green growth and local business. Will you speak up on that, perhaps meet me and Swansea University, and basically champion green jobs and growth, in order to stop the cuts in Wales? This happens further afield than Swansea as well.
David T. C. Davies: I do not recognise that will be cuts in Wales because, obviously, all the money coming from Europe will be replaced by the shared prosperity fund. I have visited Swansea University on a number of occasions as a Minister, and I am happy to do so again. To the best of my knowledge, the last time I visited Swansea, I do not recall that particular issue being raised.
Q516 Geraint Davies: It is being flagged up as an emergency now. Those projects are on hold. The specifically point is that the shared prosperity fund is not in place to sort this out. People urgently need bridging funding until the new systems are put in place, so that jobs can continue. You might be aware that a lot of them are at the cutting edge of green growth.
David T. C. Davies: The shared prosperity fund is a matter for DLUHC, but as I have said, we have a role in making sure that Wales’s voice is heard at the Cabinet table. I have written to DLUHC already to ask that progress be made quickly on the shared prosperity fund.
Q517 Geraint Davies: Perhaps you can have a word with Grant Shapps as well, to whom I have already spoken. There is interest in this, but if you could fly the flag for Wales, it would help.
David T. C. Davies: I am sure my officials have taken note of your comments, Mr Davies. I sense that we might be doing another letter on that specific point about Swansea University when we have a bit more information about it. I am very happy to write on that issue.
Q518 Geraint Davies: Moving on, in a similar vein, the Welsh Government decided to give local authorities 3.5% of extra funding, but inflation is running at 10%. Given that the profile in Wales is older, poorer and sicker than the UK average, and the average wage is something like 70% of the UK average, will you press the Government to ensure that we get our fair share for local authorities—something closer to the level of inflation—so that we can hold up public services?
David T. C. Davies: You will be aware, Mr Davies, that we gave a record-breaking increase of £2.5 billion to the Welsh Government. What they do with it is a matter for them. I am aware of the concern about inflation, which is running at those sorts of levels across much of western Europe and the United States. Although I do not sit in the Treasury, I am aware that the Chancellor is going through the figures at the moment. He will do everything possible on the 17th to ensure that the areas that have the most need will get what we can provide.
Q519 Geraint Davies: In Swansea, for example, the energy cost to the local authority will go up by £15 million—from £5 million to £20 million—next year. For the health service across Wales, energy costs will go up by £200 million. I appreciate that you have not got a money bag sitting beside you, but the issue here, again, is that Wales has special needs, and our profile is more vulnerable. Will you work hard to ensure that we get our fair share in difficult times?
David T. C. Davies: Yes, I will certainly be doing that. Obviously, the NHS and many other public sector organisations have been hit by increases in energy costs. That is why we brought in the guarantee until April, which will mean that most organisations will only be paying half of what they would if the guarantee was not there. Clearly, that will be reviewed before April to see what we can do to continue it.
The problem that we faced—it was well publicised a month or so ago—was that trying to keep that going for up to two years could have cost up to £130 billion. It would have been very difficult to do that without borrowing at much higher rates of interest. As you rightly say, there is no sort of cupboard anywhere in Whitehall marked “Money” with a load of cash in it. The sums of money that we would need to keep energy at the cost it was at 18 months or two years ago are absolutely immense.
However, having said all that, as we all know, of course, I will be doing everything possible to ensure that Wales continues to get as much money as possible out of the Treasury. Under the system in place Wales gets about £1.20 for every £1 spent in devolved areas in England.
Q520 Geraint Davies: You will be aware that there are problems with children and other people in hunger across Wales and the UK. The latest figures are that one in four people—and one in five children—are in hunger. Through the Welsh Government, in Wales we have free school breakfasts and are rolling out free school lunches. However, I am told they have not got the money for free school lunches in the holiday period. You will remember the campaign by Marcus Rashford and others. Will you be prepared to press the Government to help Wales to get that extra money for the holiday period, because it is a desperate situation?
David T. C. Davies: Mr Davies, you will be aware that all I can do is try to get money from the UK Government to the Wales Government. The last time around there was an increase by £2.5 billion. What the Wales Government do with that money is entirely a matter for them. Were I to start suggesting that they spend it on this, that or the other in devolved areas, obviously I would create exactly the sort of row that I have said we are hoping to avoid. I am not here to tell the Welsh Government how to spend their money. They have a large sum of money. They also have tax-raising powers, and the ability, if they want—
Geraint Davies: I guess what I am saying is that they do provide this food for children who are otherwise hungry at school—
David T. C. Davies: And that is a wonderful thing to do—
Geraint Davies: I am glad you said that, because they do not provide that in England—that is the point. I want you to encourage England to provide English children with some food at the start of school, and to provide the money for everyone to have that food, rather than it coming out of other pots.
David T. C. Davies: This is a much wider discussion, but clearly one would have to decide whether it is a good idea to provide one, two or three meals a day every single day of the year to every child in the country, or whether, perhaps—
Geraint Davies: It is not three; it is two.
David T. C. Davies: Well, I don’t know; if two were provided, I can guarantee that some people would say, “What about dinner?” It is a difficult issue. The UK Government are trying to target help at those who need it the most, and are supplying money to the Welsh Government.
The Welsh Government have the freedom to do what they want to do. They could raise taxes if they wanted to, and provide as many meals to people as they wanted as often as they wanted if they thought that was a good use of—
Q521 Geraint Davies: There is a poorer tax base, of course, in Wales. One of the reasons for that is that we have not got the investment in railways to raise productivity and wages. You will know that over the years Wales has had 1.5% of announced rail investment for 5% of the people, and we have not had our 5% of HS2, which would give us about £5 billion. If you remember, I met you and Professor Mark Barry to discuss that. Will you urge, as Tories in Wales are urging, that Wales gets our fair share—mainly our 5% of HS2—so we can provide more productivity and wealth creation in Wales to pay the taxes that you want to raise?
David T. C. Davies: First of all, Mr Davies, I am not sure that I recognise the £5 billion figure. I mean, 5% is normally what Barnett consequentials mean, is it not? I think that phase 1 of HS2 is £40 billion.
Geraint Davies: I think it is projected as over £100 billion for the total project.
David T. C. Davies: I think that is the estimate for the whole thing when it is finally finished. As I understand it—my officials may correct me if I am wrong; it is not a Wales Office matter—between now and 2029-30, the cost of phase 1 of HS2 is about £40 billion. I do not know exactly when work starts—
Q522 Geraint Davies: Will you fight for the £2 billion for the first phase?
David T. C. Davies: That is over 10 years or so, so that is about £200 million a year. Over this control period, £340 million has been spent on rail improvements in Wales. We have had the Core Valley Lines—£125 million; £76 million for the electrification of the tunnel; £58 million for Cardiff Central station.
Geraint Davies: There has been some money, but less than our proportionate share.
David T. C. Davies: Well, actually, if we just leave aside that straightforward spending on rail, we also have to remember that the Cardiff metro is a light rail system, and that is a match-funded UK Government growth deal. That is worth well over £500 million.
With the greatest respect to Mark Barry, who is no doubt an expert in his field, he keeps bandying around this £5 billion figure, which I just don’t recognise. It doesn’t bear any relation to the figures that the Government have published on HS2.
Geraint Davies: It is our share of the total projected cost.
David T. C. Davies: But if one takes 5% of £40 billion over 10 years, one has a figure of £200 million. I can already point to £340 million of spending over a control period in Wales, plus the Cardiff metro, plus the spending that is going on outside of Wales that benefits Welsh passengers. I politely suggest to you—a keen environmentalist—that HS2 is there to get people out—
Chair: Order. Sorry to cut across you, Secretary of State. In terms of time keeping, we need to move on to my next colleague. I’m not sure we’ll get to the bottom of the funding figures, but maybe we could come back to that on another occasion. Beth Winter, please.
Q523 Beth Winter: Llongyfarchaiadau are eich apwyntiad a diolch yn fawr am ddod heddiw. [Translation: Congratulations on your appointment and thank you very much for coming today.] I really appreciate it. I don’t know if you are aware that the chair of the Welsh Local Government Association over the past week has been highlighting the decimation of public services that is likely to happen—a black hole of over £800 million. Andrew Morgan has said, “We are clinging to the cliff edge by our fingernails. This won’t simply be about cutting services. If there is not UK Government intervention, there will be wholesale closing down of services.”
Like my colleague in Swansea, my local authority is facing a shortfall of between £45 million and £47 million next year. Mr Morgan has said that even if we totally cut library, leisure and bin services, there will still be millions of pounds in shortfall. What do you say to the council leaders in Wales?
David T. C. Davies: First and foremost, we are facing very difficult economic times. As you will recognise, Ms Winter, we tried to borrow our way out of an energy crisis that has been caused by a war in Ukraine, and followed a global pandemic, and we found we were not able to do that. We simply couldn’t borrow that money.
That leaves us having to make a decision about taxes and spending, and those decisions are going to be difficult. I have not heard Andrew Morgan, or anyone else who has made those perfectly valid points, suggest where extra money could come from to deal with the problems that have arisen.
With the greatest of respect to Mr Morgan, with whom I had a very positive informal discussion at the weekend when we appeared on a TV programme, some of the local authorities—Rhondda Cynon Taf might be among them—do have large amounts of reserves. Some seem to have a lot more than others. Monmouthshire does not have much at all, but some have quite significant reserves. This may be the moment to look at that.
The other point I would make is that it is not down to the UK Government to tell the Welsh Government exactly how much money to give to each of the 22 local authorities in Wales. That is a matter for the Welsh Government to decide. They did receive an increase of £2.5 billion and they do have tax-raising powers. If they think there is a simple way to fund local authorities better, they have the ability to do that themselves, and probably would not welcome me telling them exactly what to do.
Q524 Beth Winter: You will be unsurprised that I am going to challenge you on some of the figures. As a result of inflation, the Welsh Government’s budget in the three-year spending round of 2022-25 is now worth up to £4 billion less in real terms. The budget for 2024-25 would have been £3.5 billion higher if it had increased in line with the economy since 2010. Obviously, there is £1.1 billion in unreplaced funding as a result of us leaving the EU. Those are Welsh Government figures, not my figures plucked out of the air, and the purse strings lie squarely with the UK Government.
Jeremy Miles recently said that it is a disgrace that the UK Government has left us in an impossible situation. He has assured education workers that he will continue to work with colleagues to push the UK Government to provide Wales with a fair funding settlement. The figures I gave you clearly contradict the position that you are relaying to me. What do you say to the Welsh Government?
David T. C. Davies: First of all, I have not seen those figures, so I am not able to give a full analysis of them. I hear you say that the Welsh Government are saying that they will lose out as a result of leaving the European Union. I certainly don’t recognise that figure. I know that they have tried to count the tail on funding that went on beyond the EU structural fund period. They are trying to suggest that, had we stayed in the EU, they would have got the tail and a whole load of extra money on top, and that is not the case. The EU money does not usually start flowing in straightaway, whereas the shared prosperity fund money will, so I completely reject the argument about losing out as a result of leaving the European Union.
Beth Winter: Can I—
David T. C. Davies: I will concede one thing, which is that like all other countries in western Europe and the United States, we are facing high levels of inflation at the moment, which clearly has an impact. To gently throw it back to you, the Labour party expressed concerns about the Government borrowing money, which we tried to do in order to get us through an energy crisis caused by international circumstances. We know that we cannot do that—certainly not paying the levels of interest that we want. We are then left with difficult decisions over spending or taxes. With the greatest of respect, I haven’t heard anyone from the Labour party who has criticised the Government over these issues actually saying where they would get the money from. If you are able to tell me, I will go back to the Treasury with some ideas.
Q525 Beth Winter: Well, I led a Westminster Hall debate yesterday, and I quoted Tax Justice UK, which said only last week that the Government could raise up to £37 billion a year by taxing wealth. Most people would agree that it was absolutely astonishing that BP recorded profits of £7.1 billion in the last three months.
Can I move on to two other questions? Today, all parliamentarians are being lobbied by trade unions, which are coming to Westminster. Will you meet the trade unions that are coming up from Wales?
David T. C. Davies: I am meeting one of my constituents, who represents a trade union, at 11.30 am. I will then be going off to call the First Minister and then to attend an event in Cardiff. It is already happening.
Q526 Beth Winter: Do you agree that public sector workers deserve an inflation-proof pay rise?
David T. C. Davies: I would love to see everyone getting inflation-proof pay rises in an ideal world. Again, if we could find the money, we would all want to see that happen. It is not the case that anyone in Government wants people not to have inflation-proof pay rises; it is a matter of making very difficult decisions in times of economic crisis. I am confident that the Chancellor and the Prime Minister will be looking at making sure the most vulnerable have help targeted at them.
Q527 Beth Winter: And people on benefits?
David T. C. Davies: Again, I know the Chancellor is a very compassionate man and will want to support those who are least well off. We will target what help we can at the most vulnerable. That is quite right; that is what we should be doing.
Q528 Beth Winter: Finally, you have been recorded in previous years as being a bit of a climate sceptic in quotes that I have seen—but that is going back a few years. It is an issue that is very close to my heart. We have had climate assemblies in my constituency, and we now have a climate ministry in Wales. Can you give me some assurances that you accept we are facing an existential crisis, in terms of the climate, and that you will champion the issue of climate change?
David T. C. Davies: I have spoken on this issue on a number of occasions over probably 10 or 12 years. On virtually every occasion, I have made the point that CO2 is a global warming gas. We have been emitting a lot of it ever since the industrial revolution, and therefore it has had an effect on climate. I have looked back at various speeches that I have made, and that has always been very clear.
I have not changed my view that carbon dioxide is definitely a global warming gas, and it is having an impact on the climate, as I have said many times over the last 10 years. I know that at least one journalist in Wales, who seems to have a personal animus towards me for some reason, has spent an unhealthy amount of his time trawling through every single speech I have ever made on anything to see if he can pluck things out to have a go at. He celebrated the fact that he managed to find one speech or article somewhere online where this was not clear; it came back to me, and I took it down—when I eventually found it.
I have already said that I am hugely in favour of things such as floating offshore wind. I am hugely in favour of nuclear energy, which we have not talked about; that also creates large amounts of baseload electricity without creating carbon dioxide emissions. Ms Winter, you have just made a very strong point about the cost of living crisis and the cost of energy, which we are all facing, and the impact that is having on the public sector among other things. I hope you would also agree that we need to do everything we can to ensure that energy is as cheap as possible for people.
Q529 Virginia Crosbie: Croeso. Thank you both for coming to my Anglesey skills day in Westminster on Monday. My first question relates to St David’s Day. What assessments have you made of the potential effect on the Welsh economy and tourism industry of denoting St David’s Day as a bank holiday?
David T. C. Davies: First of all, thank you very much for the event you organised; it was wonderful.
As far as the argument about St David’s Day is concerned, clearly bank holidays do have a cost. I think there has been a suggestion that one might want to move one bank holiday to another; possibly, May Day—the festival to celebrate international socialism—might be moved to 1 March to celebrate St David’s Day. That is not Government policy at the moment.
There are some issues where I feel very strongly and there are others where I feel rather more relaxed. This is not something I would ever storm out of Cabinet over, whatever happened. I accept the Government position as it is, and on balance I support it because I think there are some advantages in not having a bank holiday.
I have three children who all went to a state school in south Wales, and they always used to celebrate St David’s Day in school. I have been there a few times to watch them dancing and singing. I suspect that had they not been in school, rather than celebrating this wonderful part of Welsh culture and enjoying a bit of the language and the dancing, there might have been a tendency to flop down on a sofa and mess around with the PlayStation. I would rather them be celebrating Welsh culture. On balance I am happy with things as they are and our children celebrating St David’s Day in school. If that policy changes at some time in the future, I would look for other ways to ensure that our culture is celebrated.
Q530 Virginia Crosbie: The number of MSs in Wales is due to go from 60 to 96. One MS will be responsible for about 53,000 constituents. MPs represent about 103,000 constituents. There is an estimated cost of £100 million for the increase. Have you had any discussions with the Welsh Government about this? Where will the £100 million actually come from?
David T. C. Davies: That is a very interesting question. I am tempted to ask it of the First Minister, but perhaps that would not kick off the relationship that we are looking for. It is not really a matter for me if the Welsh Government decide they want to spend £100 million during a cost of living crisis on creating extra Members of the Senedd. However, I must observe one thing: when I was first elected to the Senedd in 1999, one of the advantages that even I acknowledged—as someone who had recently been in a campaign against having a Welsh Assembly—was that it was sometimes easier to get hold of a Senedd Member who was in Cardiff and near to a constituency than it was a Member of Parliament. One of the issues here is that the direct link with constituencies is going to be completely broken as a result of the plans that are being brought forward. Clearly, it is a matter for the Welsh Government; I am just surprised that they do not want to put it to a referendum and see if the public support it or not.
Q531 Virginia Crosbie: It is great to hear that you are a supporter and fan of nuclear. My question relates to the fact that the Welsh Labour Government have a co-operation agreement with Plaid. Adam Price has said that “We are a party that doesn’t believe in nuclear. We do not support nuclear power. It’s the wrong answer.” How practically can we therefore get nuclear investment into Wales, given the co-operation agreement with Plaid, who do not support nuclear?
David T. C. Davies: Obviously Mr Lake is not here now to speak for Plaid Cymru on that issue. I can only say that we are 100% in favour of nuclear, and I, as Welsh Secretary, am hugely enthusiastic about nuclear coming to Wylfa on Ynys Môn and SMRs coming to Trawsfynydd. Within those areas, as far as I can see, there is cross-party support. It is interesting that, while some parties nationally may take a view that they are against nuclear power, where a nuclear power station is being proposed those very same political parties are all in favour of it. That goes to show why nuclear power is one of the answers to the energy crisis that we are facing at the moment, and I hope that all members of the Welsh Affairs Committee might agree.
Q532 Virginia Crosbie: You mentioned the record £18 billion funding to Welsh Government in 2021, which was the equivalent of £120 per person in Wales for every £100 per person in England from the UK Government. You also mentioned that the distribution of that funding is a matter for the Welsh Government. My concern relates to healthcare, in terms of A&E targets and the fact that our waiting times for treatment and for ambulances are significantly worse in England and Wales compared with the rest of the UK. Where is the accountability for this £18 billion?
David T. C. Davies: Again, that is a very good question. When Wales is getting more money per head—£1.20 per head is being given to Wales in devolved areas for every £1 being spent in England—it is quite hard to understand why we have longer waiting lists and less access to ambulances than patients in England, and why so many patients in Wales actually want to be treated in England. These are all very interesting questions, and it is difficult for me to understand the answers to them, but unfortunately, they are not questions that I am in a position to answer; they should be directed towards Welsh Government Ministers. My colleague could probably add to that.
Dr James Davies: One of the benefits of devolution was to be that we could compare different policies across the United Kingdom, to see which are most effective. I am very much of the opinion that openness, transparency and comparison of performance and outcomes is really important, because it helps the democratic choice of our voters and drives up standards. That is what I would be looking to push.
Q533 Virginia Crosbie: I have two quick questions. One is on freeports. There is going to be at least one freeport in Wales. I understand that four freeports have expressed interest, and the deadline is 24 November. You talked about the £26 million funding for the first one. How will it work practically for the second one? Does that mean liaising with Treasury? What will be your involvement, and what will be Welsh Government’s involvement?
David T. C. Davies: The only information I can give you about that is that the Government would take a flexible approach if there were a number of good bids towards a second freeport, but I am not in a position to say what, if any, extra funding might be available to get that up and running.
Q534 Virginia Crosbie: Thank you. You talked about targeted help. We have the Budget on 17 November. We have talked about the cost of living in Wales and the very rural communities, where many businesses and homes rely on off-grid energy for heating. While the £100 is welcome, we are going into a cold winter. What conversations have you had with Treasury to make sure you fight on behalf of our communities?
David T. C. Davies: I have not directly had any meetings with Treasury since being appointed, but obviously I have attended Cabinet. I do not want to give away any details of what was being discussed, but I think it is fair to say that the Prime Minister has made very clear that we should be targeting all help at the least well-off. If we look at the Prime Minister’s record as Chancellor, that was always the case. That is why we had the £650 payment to people on benefits, £300 to pensioners and £150 to those who are disabled. He was the Chancellor who brought in the furlough scheme, which supported millions of jobs and millions of people who are self-employed all the way through the covid crisis. He has a very strong record of targeting help at those who need it and targeting it at the least well-off, and I am sure that that approach will continue and will be seen when the statement comes out.
Dr James Davies: I could also come in on that. I have had similar concerns about rural constituents. It is important to remember that virtually everyone has an electricity contract, and they therefore benefit from the energy bill support scheme—the £400—in addition to the energy price guarantee on electricity.
When it comes to alternative fuels, I believe that, once the energy price guarantee has been factored in, the increase in the cost of natural gas over the last year for those on the grid is 130%. The equivalent figure for oil is 147%. The £100 makes the difference between 130% and 147%: it brings the 147% down to 130%. But it is important that the costs of oil and other alternative fuels are monitored closely. Clearly, if they go up more than natural gas, that figure may need to be re-examined.
Q535 Chair: Before I bring in Wayne David, can I press you on that issue, Dr Davies? Some 57% of homes in Pembrokeshire do not have access to mains gas, so it is a live issue for them. With the explanation that you have just given to the Committee, are you saying that the £100 is an adequate and appropriate amount?
Dr James Davies: The point is that those who are off grid have always paid more, haven’t they? BEIS has not tried to bring the cost down to match that of natural gas. Its argument is that it is fair, and the statistics that I have claim to prove that. I would be happy to share those, if it helps.
David T. C. Davies: Obviously, we accept that there are many people in rural areas, off grid, who are suffering at the moment. I am sure that the Treasury will want to look at that. We are not in a position to say what help may or may not be given, but one immediate thing that could be done to support those in rural areas would be for the Welsh Government to re-evaluate the local government funding formula, which seems to count local authorities with urban areas and not rural areas. That is an example of something that could be done to support those in rural areas.
Chair: I just make the point that I have a lot of constituents who are trying to get ready for winter and are being told that they have to pay for a minimum amount of 500 litres of heating oil. These people do not have £500 in cash to hand to buy heating oil. I will leave that thought with you.
Q536 Wayne David: Congratulations, Secretary of State, on your appointment. Could I begin by making a comment regarding HS2? The Committee prepared a report last year. The leader of the Welsh Conservatives commented that, if there was a realisation that HS2 is an English-only project, which it is in reality—you know that—there would be a Barnett consequential to Wales of £5 billion, or perhaps slightly less. You cannot get away from that fact, can you?
David T. C. Davies: I cannot get away from the fact that, if it was classified as an English-only project, there would be a Barnett consequential, which would be about 5%. That is correct.
Q537 Wayne David: In other words, the Government are short-changing Wales by not accepting that obvious categorisation—that objective reality.
David T. C. Davies: Well, not necessarily. First, I do not recognise the £5 billion figure. That would suggest £100 billion, which would be over a period of many years. Phase 1 is due to run up until about 2029 or 2030. Dare I say it, the way things are with construction projects like that, I would not be confident that it will necessarily finish exactly on the day planned.
Q538 Wayne David: Okay, then we will say slightly less, but nevertheless the point is still there.
David T. C. Davies: Well, quite significantly less. If we took £40 billion, which is the presumed figure for phase 1, over a 10-year period, that would be £200 million a year. That would be the sort of figure we are talking about. The uplift for the Welsh Government last year was £2.5 billion, which is obviously more than 10 times £200 million. The other issue is that the UK Government are spending a lot of money on the rail network in Wales. It was £340 million over that control period. There are projects in RNEP that may come forward. It is basically—
Q539 Wayne David: I am sorry to interrupt you, but you have said all this before. You are basically arguing about angels on the head of a pin. What I am saying is that Wales would have had more money if the Government accepted the reality that HS2 is an English-only project. That is true, isn’t it?
David T. C. Davies: Well, it is a fact—you are correct, Mr David. It is obviously a fact that, if any project is accepted as English-only and is devolved, there is a Barnett consequential. You are factually correct in that sense.
Q540 Wayne David: We’re correct and you’re wrong; thank you very much indeed.
Let me turn to the cost of living. I am sure you have seen it, but the Bevan Foundation prepared an excellent report in July this year. I will quote exactly one of the things they said: “More than half of people in households with an income of less than £70,000 report that they had to cut back on their heating, electricity and or water.” The likelihood is that things will get a lot, lot worse during the next few months. You have already said that you are keen for resources to be targeted at less well-off people, and that is absolutely necessary. What representations are you therefore making to the Chancellor on what the specific policies should be?
David T. C. Davies: I have not spoken to the Chancellor yet in this current role, but there have been discussions in Cabinet. All I will say is that there was a clear feeling that targeted help needs to go to the most vulnerable. That is a Government view. I believe that the current Prime Minister’s previous role as Chancellor underlined his own commitment to targeting help at the most vulnerable. I cannot go through those books myself; the Chancellor of the Exchequer will come out with a statement on 17 November, but I am confident that he will target all the help that we can at the least well-off, and rightly so.
Q541 Wayne David: Thank you for that; I hope you are correct. A number of your colleagues have said that increases in benefits should be keeping up with inflation rather than earnings. Is that your view?
David T. C. Davies: In an ideal world, of course that is what I would like to see happen. We are not living in an ideal world at the moment, and I do not know what we will be able to afford to do. I think you have been in Government, Mr David; you will be well aware of the difficulties that any Government faces at a time like this. There is a limit to the amount of money that we can spend. We have already discovered that we cannot borrow money, or we cannot borrow in the amounts that we would like at the levels of interest that we want. That leaves only two alternatives: either putting up taxes—but I do not believe it is your policy, sir, to support tax increases—or cuts to spending. The Chancellor will have to look very carefully and be very clever in how we spend the limited amount of money that we have.
I think you will find that we are probably on the same side in wanting that help targeted at the most vulnerable. But is it necessarily responsible, sir—not that you are doing this—to call for more money for this, for everyone to have inflation-busting pay rises, for more money for every public service, but to say, “No, we don’t want extra taxes and no, we don’t want to borrow the money”?
Q542 Wayne David: Okay, you have answered the question. What you say is true, of course—we have to make sure that everything is properly costed—but nevertheless there is a contradiction between what you say there and what you said earlier about the principle that help must be targeted at those who need it most. That is what I am asking you about specifically. One of the best ways to do that is to make sure that benefits are increased with inflation. That is a sure way to do it.
David T. C. Davies: That would be a sure way to help people, but I don’t know what is affordable and what is not at the moment. I know that is what the Government would want to do, if they possibly can.
Q543 Wayne David: Would you be in favour, then, to ensure that that happens, of the introduction of a special tax on non-dom status? It is a clear choice.
David T. C. Davies: I cannot start giving you answers on what specific taxes the Government may need to bring in in order to fund help for the most vulnerable. With the greatest respect, sir, I have heard members of your party already today saying that every person who works in the public sector, which I presume includes even MPs, should have an inflation-busting pay rise. I can understand the argument for those on lower wages to have pay rises, but there are a lot of people in the public sector who are earning as much as the Prime Minister or more. Are we saying we should all have inflation-busting pay rises, because we are in the public sector? What about those in the private sector on low wages?
Wayne David: I would love to answer your question, but we are not in government yet.
David T. C. Davies: It is a hypothetical one, sir, but you see the problem.
Q544 Wayne David: If I may go on, the shared prosperity fund is an important initiative that the Government have taken to largely replace, you would argue, Wales’s European funding, but we have heard from local authorities, and they are very critical of a number of aspects of the shared prosperity fund. One of the biggest concerns is that the timescale is such that local government has been given impossible deadlines to meet to come forward with projects that would qualify for support. Why have you determined those tight timescales? If local authorities are in a position where, according to your timescale, they are not able to use all the money that has been allocated to them, will that money stay with them and there will be a carry-over, or will it go back to the Treasury?
David T. C. Davies: First of all, my understanding is that the four lead local authorities for Wales have already submitted their regional investment plans, which are being looked at by DLUHC. Anecdotally, I have spoken to various local authority leaders over the last 12 months, at different times, and they have all told me informally that they are very happy to be having a direct relationship with the UK Government and feel very positive about that. As to whether, if there is an underspend, any of that money will go back to the Treasury, I am looking—I don’t actually have that information in front of me. My thinking is it probably would, but I don’t see any reason—that is because I think I have read that elsewhere. I will check that.
Wayne David: That is an extremely important point. You really want to have been briefed on that.
David T. C. Davies: I will see whether I can get any confirmation from officials on that, and I will absolutely write to you. I believe it probably will, but—
Wayne David: Yes, exactly—it will.
David T. C. Davies: But if there are projects that are ready to go, I cannot understand why local authorities, which, as you have just said, are all saying, rightly, how difficult things are economically at the moment, would underspend that money.
Q545 Wayne David: But there is a suspicion—I put it no more strongly than that—that the Government have deliberately concocted this process to ensure that local authorities, although it looks good on paper if they have been allocated large sums of money, in practice are not able to spend them, and the Government are using this as a smokescreen basically to retain funds that should be going to local authorities.
David T. C. Davies: Mr David, I have an answer for you, as it happens.
Wayne David: Oh good.
David T. C. Davies: The three-year funding period for the UK shared prosperity fund ends in 2025. No funding will be provided for activity after 31 March 2025, and the expectation is that any further underspends in the final year of the programme will be paid to DLUHC. I think the answer to your question is that if the underspend goes as far as the year 2024-25, it will be paid back. I would hope, now that we know that, that all local authorities putting in bids will want to ensure that there are no underspends, because it is not my role to get money from Wales into the Treasury—
Wayne David: Absolutely not.
David T. C. Davies: It is my role to get money from the Treasury into Wales; I am very clear about that.
Q546 Wayne David: That’s right, so I would very much hope that the gun that is being placed to the head of local authorities will be put back in its—
David T. C. Davies: I am sure local authorities will now have heard this, if they didn’t know it already, and they will all be making absolutely certain there are no underspends. I will cheer them on as they put that money to good use. I look forward to visiting—
Wayne David: And I will hope that the Government are more flexible in ensuring that the principle of spending money is upheld.
Chair: Thank you very much, Wayne David. On that note of clarity, Rob Roberts, please.
Q547 Rob Roberts: Welcome, gentlemen. I have the dubious honour of going last and mopping up with questions that follow on from things that you have already answered. I also went on my social media a couple of days ago and said that you were coming and asked constituents what they might ask you if they were sitting here, so I have a couple of those—just to channel my inner Corbyn.
We will start with devolution and intergovernmental relations generally. When Ms Crosbie asked about going from 60 to 96 Members of the Senedd, you said, “It’s not a matter for me.” I am going to say that it is, because we are not talking about what happens in devolution; we are talking about the nature of devolution itself. The Senedd was established with 60 Members and a hybrid voting system. Do you believe that a change to the structure and the voting system should go back to the people for approval over whether they want to spend that extra £100 million?
David T. C. Davies: If you are asking me personally, Mr Roberts, I think that would be a fair thing to do, but it is not my role as Secretary of State to advise the Welsh Government on how they should reconfigure devolution. But given that there was a second referendum over tax-raising powers, in which people voted, by the way, for tax-raising powers—as a democrat who always believes in supporting the result of referendums, no matter what they are on, I absolutely support the fact that the Welsh Government have got tax-raising powers—I am surprised that such a big change is taking place without further consultation with the public.
Q548 Rob Roberts: Thank you for that; I appreciate the sentiment. Last week, I attended the Interparliamentary Forum in Cardiff, with Members of the Senedd, Holyrood and the House of Lords. The overwhelming concern from the other legislatures in terms of intergovernmental relations is around the Sewel convention and legislative consent motions. With regard to Sewel first, do you agree that wording like, “The UK Government will not normally” is a little bit too woolly? Does that perhaps need to be codified in order to provide a bit more certainty and a little bit less animosity between the Governments?
David T. C. Davies: We do not want to see animosity, but I think the wording is okay, isn’t it? I mean, the UK Government would not normally want to legislate without the full support of the Welsh Government. That is a reasonable position to take.
Q549 Rob Roberts: It is, but isn’t it too easy for the UK Government to then say, “Yes, but these aren’t normal times”? That is a subjective thing, right?
David T. C. Davies: If we take something like UKIM, the point the UK Government were making was that had they not legislated, we would have effectively been handing the Welsh Government control over a major aspect of foreign affairs, which is the ability to strike trade deals. That would have given the Welsh Government powers that went far beyond what anyone had agreed in any referendum. I believe there were either eight or 10 Bills that went through with LCM, so the vast majority of them were all sorted out perfectly constructively. There are conversations going on all the time between officials in both the Welsh Government and the UK Government to make sure that things can get sorted out.
Q550 Rob Roberts: With regard to the LCM process, there seems to be a general consensus among the other legislatures that, quite often, the engagement on those comes reasonably late in the day. It means that they then have to scramble to pull things together quickly, which leads to a bit of wasted resources. Do you agree that there should be a standard time limit allowed?
David T. C. Davies: That is a good idea; I had not heard that put before, but it does not entirely surprise me. I do not think one should read too much in the way of conspiracy into any of that. There have been many occasions, dare I say it, when, as a Minister, I have been handed papers rather later than I would perhaps have liked, and I believe that is a problem that many people have raised over the years. I am sure that officials work very hard to try to make sure that consultation takes place in good time, and I am sure they will have heard your comments, Mr Roberts, and taken note.
Q551 Rob Roberts: I appreciate that.
I come to the first of my guest questions now. I have a question from Andrew, who is an assistant headteacher in my constituency. He asks: “Given the differences with the demographics in Wales, do you believe that the Barnett formula—which was a temporary measure many years ago—remains the best funding formula for Wales to reach its potential?”
David T. C. Davies: Currently, as Ms Crosbie has said, Wales is getting £1.20 for every pound that is spent in devolved areas, so we are doing quite well out of things at the moment. My worry is that if we went back to the drawing board and came up with a completely different formula, there is, of course, the possibility that Wales could end up getting significantly less than it does at the moment.
Q552 Rob Roberts: I completely appreciate that. It is something that has been looked at over decades.
I want to turn to cost of living and economy-type questions. Another Andrew—a different Andrew—who runs a local caravan park wants to know whether you think the tourism tax is a regressive step for Wales, or whether it will be useful.
David T. C. Davies: I think the tourism tax is an incredibly bad idea for the tourism industry, even more so in border areas. Where, for example, people have a choice of going to either Monmouth or the Forest of Dean in my own part of the world, there is going to be a financial incentive to go to the Forest of Dean rather than coming and staying in Monmouthshire. I think we will see that all the way up the Welsh border, and perhaps beyond. It is a great shame.
Rob Roberts: It is indeed.
David T. C. Davies: It is a matter for the Welsh Government, of course, not for me.
Rob Roberts: Of course.
Dr James Davies: There is another issue on tourism, actually. I have many constituents with holiday lets who are extremely concerned that because they have not been able to let out their property for a sufficient number of days, due to the Welsh Government’s own lockdown rules, they are now being penalised in retrospect by having to pay council tax at an inflated rate. That is another aspect whereby tourism needs a voice.
Q553 Rob Roberts: Indeed. On the cost of living more generally, you answered questions from my colleague Mr David earlier regarding uprating of benefits by inflation, but you did not mention pensions and the triple lock. Do you agree that pensions should be increased in line with inflation?
David T. C. Davies: In an ideal world, I would agree. I would want to see pensions, benefits, public sector pay, and the pay of anyone—particularly those on lower wages—increasing in line with inflation, or even beyond. That is what I would like in an ideal world, yes, but we are not in an ideal world.
Q554 Rob Roberts: Indeed we are not, but we are not sure whether there will be uprating of benefits, and you talked about people on low incomes. There is also talk of freezing the income tax thresholds for longer, so people will end up paying more tax by stealth almost. Do you agree that that is an appropriate policy in such difficult times?
David T. C. Davies: You will be aware, Mr Roberts, and I am sure everyone in the room is aware, that I do not know the specifics of what is going to come out in the financial statement. I doubt whether I will be told in advance—maybe, but if so, it will probably only be a few hours in advance, if at all. I am sure I will learn about it at the same time as everyone else.
I can only say to you that I know the Chancellor and the Prime Minister to be compassionate men who are acutely aware of the need to target all possible help at the least well-off. By that I mean those on benefits, pensioners, those who are disabled. I just don’t know what they are going to do. Even if I did know, I would not be able to say so at this meeting, but I genuinely do not know. I think you will appreciate that I do not know. The Secretary of State for Wales is not going to be given advance notice of what is going to go into the Budget.
I do know there are going to be some difficult decisions, because we all accept the financial problem that we face. It is not one that the UK Government have brought about, but it is going to mean some difficult decisions. I don’t know exactly where those decisions are going to affect people.
Q555 Rob Roberts: I would just like to pick up on something the Chair mentioned about lower income households and off-grid households. Do you think the support for off-grid households is enough?
David T. C. Davies: I think £100 was certainly not generous, given the circumstances. I accept the argument that in general those who are on network gas will have seen much steeper rises in percentage terms than those are who off grid. None the less, everyone has seen huge rises in costs. I don’t feel that £100 was overly generous and I am sure that is another item that the Government will be looking at.
Q556 Rob Roberts: Given that that is a relatively larger demographic in Wales, compared with the rest of the country, what kind of representations are you making to get that changed?
David T. C. Davies: I will make a representation about that, given the percentage of people in Wales who are off grid. I believe the Government are already well aware of it. It doesn’t just affect Wales; it affects people in rural areas across the whole of the United Kingdom.
Rob Roberts: May I have one more quick question, Chair?
Chair: If you are super quick.
Q557 Rob Roberts: I will be. Following on from the shared prosperity fund question earlier, local authorities expected to receive answers in October about whether their plans were acceptable. Have they received those responses? If not, when can they expect to receive them, and when will the funds be released?
David T. C. Davies: We have already been in touch with DLUHC to express our view that it is important that that question be answered as quickly as possible. It is not actually a matter for me; it is for my colleague in DLUHC. As soon as I have an answer, I will be happy to share it with the Committee.
Dr James Davies: I think the end of this calendar year has been given as a cut-off date.
Wayne David: There’s a slippage.
Chair: Thank you, Rob. Geraint, you had a quick supplementary as well.
Q558 Geraint Davies: Yes. Throughout this hearing, you have mentioned that Wales gets £1.20 per head compared with £1 for England. Would you accept that that is because the demography of Wales is poorer, sicker and older, and therefore we need more money, and that relative to Scotland it is not generous at all? Or are you saying that we should have some sort of poll tax where everyone gets paid the same, irrespective of need? Is that what you are saying?
David T. C. Davies: I wouldn’t read too much into the comment, Mr Davies. I was just making the point that Wales actually receives more money per head for public spending than England, which is why, as I said, I am sometimes surprised that public services do not seem to be offered at the same level.
Geraint Davies: We need it more, because we’re sicker.
David T. C. Davies: The Welsh Government are getting more but not delivering as much. We have lower educational standards according to the independent PISA report, lower health standards—I would love to answer your question, but I have to go and meet my union representative in three minutes, and I am sure Ms Winter would not me to be late. She is very welcome to come and say hello as well, if she wishes.
Beth Winter: I have many constituents coming up myself, but thank you very much.
Geraint Davies: Can I ask one other question?
Q559 Chair: Sorry, Geraint, we are running out of time. Secretary of State and Under-Secretary of State, thank you for your time. I will finish with one quick question. When Virginia Crosbie asked you about the issue of a St David’s Day bank holiday, you said that it is an issue that you probably wouldn’t stamp out of Cabinet over.
David T. C. Davies: Correct.
Chair: What is an issue that you would leave Cabinet over? [Laughter.]
David T. C. Davies: Mr Chairman, I have only been a Cabinet Minister for a week or so; given the superb Prime Minister we have got, I cannot imagine that there will be any issue at all that will lead me to want to walk away from such a fantastic Prime Minister.
Chair: Thank you very much. That is very helpful. We look forward to welcoming you back very soon, Secretary of State. There are lots of issues that are of direct relevance to us and our constituents, and we value the opportunity to discuss them further with you.