HC Deb 13 December 1995 vol 268 cc1002-17 4.18 pm
The Secretary of State for Wales (Mr. William Hague)

With permission, Madam Speaker, I should like to make a statement on public expenditure in Wales. Copies of my statement, provisional standard spending assessments, provisional capping principles and base budgets for unitary authorities are available in the Vote Office. I will outline today how I propose to allocate money to spending programmes in Wales and what I expect that money to buy. Full details will he published in the departmental report early next year.

I have already announced that the Welsh Office will have the biggest budget ever next year—£6,865 million, including the proceeds from the planned privatisation of the Housing for Wales loan book. That is an increase of 2.2 per cent. on what is expected to be spent this year, compared with 1.2 per cent. for all Departments taken together. The long-established formula arrangements ensure that the need for higher spending in Wales than in England continues to be recognised. It is indisputably a good settlement for Wales.

The money available is a large amount. But I intend to make that money go even further than usual by maximising the use of private finance and making further efficiencies in the cost of government in Wales. I am examining 25 potential projects under the private finance initiative, which together have a total value of £1 billion. In the next three years, I expect the PFI to bring in £360 million of additional capital investment. Private finance has a lot to offer the health service and the roads programme.

We will announce very soon the first major PFI project in Wales to come to fruition. That will be in addition to the large amount of private investment which Welsh Office programmes already lever in. This year, I expect more than £600 million to be generated. I want to see that sum increased in future years.

Next year, the Welsh Office will reduce its running costs as part of the drive for reducing the cost of government across the public sector. Running costs will be reduced by 8 per cent. in cash terms over the next three years. My Department will invest in new information systems to help it to build on its impressive record of securing savings, while still providing a high-quality service to the public. I also expect non-departmental public bodies in Wales to make savings in their running costs. The less money that is spent on delivering services, the more there is to spend on the services themselves.

Since I became Secretary of State for Wales, I have listened to the views of a wide range of people and organisations about what they think should be the priorities for spending. I have concluded that our priority areas should he investment in health to care for the sick and elderly; spending on education and training to ensure that everyone, but especially young people, is best equipped for the future; and protecting the environment and ensuring that conservation and economic development go hand in hand. Above all, I want to ensure that the steady and sure progress made by the Welsh economy is consolidated and encouraged. There will also be a substantial increase in the budgets of the Welsh police forces. Giving priority to those areas will mean some reductions in others, but difficult choices are unavoidable, if we are to make proper provision for our priority areas.

My decisions are set against the background of an economy which is growing healthily. In the past two years, manufacturing output has gone up nearly 7 per cent., while employment in manufacturing has grown by 13 per cent. over the same period. Productivity continues to rise, and time lost through industrial disputes has plummeted—14 working days per 1,000 employees last year, compared with 1,590 working days per 1,000 employees in 1979. Indeed, the past four years have seen the best performance since 1891.

I recognise that unemployment remains too high in some places, but it has fallen by nearly a quarter during the past three years, and today's figures show that it is continuing to fall. Long-term unemployment is falling even faster. Numbers of new vacancies notified to jobcentres are at record levels, and average wage levels are rising faster in Wales than in Great Britain as a whole.

The Government's stewardship of the nation's finances has laid the groundwork for that success. We have created the conditions in which enterprise and innovation can flourish by keeping taxes, regulation and Government spending down to a level lower than our major European competitors, which is helping to make Britain the enterprise centre of Europe.

As well as getting the basic conditions for growth right, the Government have an additional role in fostering economic development. Offers already made this year, taken together with business in the pipeline, will produce grant offers of £65 million in regional selective assistance, levering in £967 million of capital expenditure by the private sector. The number of applications received so far this year is 30 per cent. up on the same period last year. So, next year, I am making available £55 million, £12.5 million more than planned provision for this year—as well as more money to promote innovation and technology in small firms.

I will also increase the central Government assistance to the Welsh Development Agency by 58 per cent. next year to £40 million, an increase of £12 million on the previous plan. That will enable it to maintain its total spending at about this year's level, while it presses ahead with its property disposal programme.

I will maintain the level of grant in aid to the Development Board for Rural Wales at £8 million. That will enable it to sustain an economic development programme of some £18 million.

I am also maintaining the grant in aid to Cardiff Bay development corporation at £51.5 million. That is an increase of £1.2 million on the previous plan, and will enable the corporation to continue to press ahead with the barrage, take forward plans for the development of Bute avenue, and establish a site for a multi-media park at Ely fields. In recognition of the particular importance of tourism to the economy of Wales, the amount of support for the Wales Tourist Board next year will continue at its present record level of almost £15 million. Local authorities also have a role to play. I will be announcing shortly allocations of more than £56 million under the strategic development scheme.

Those are huge sums of money going into economic regeneration. They will lever in even greater amounts of private money to continue the success story that Wales has become.

Training and education are also vital to future economic growth. We must continue to invest in the work force if we are to keep pace with global competition, and if Wales is to continue its outstanding record of success in attracting inward investment. Of the total training budget for next year of £142 million, £53 million will be directed towards training young people. That is an increase of £6.6 million, or 14 per cent., over this year.

This year, about £6 million will he spent on modern apprenticeships, allowing a total of 3,400 starts. Next year, I am providing £16 million, so that, by the end of next year, more than 8,500 young people will have been able to start this programme. That will result in a real and lasting injection of new highly skilled and qualified workers into manufacturing industry in Wales.

Both the Further Education and Higher Education Funding Councils will receive increases next year over planned provision for this year. That will provide for the equivalent of more than 121,000 full-time students—a record level. Almost one in three young people now go on to higher education, compared with one in eight in 1979. In line with that priority, I have also been able to find a further £2 million in the current year to enable the Further Education Funding Council to buy more information technology and capital equipment.

Capital spending on schools will also he increased. Despite the need for reductions elsewhere, I will provide almost £44 million to local authorities for education capital—the same amount as this year. In addition, I am providing £8 million for the popular schools initiative, so that the schools that parents choose have the capital to expand. Within the overall totals, £1.5 million of capital expenditure for education will be spent over the next three years to improve access to schools for disabled children.

I come now to the health service. Spending per head on the health service in Wales is 13 per cent., or almost £100 per person, above the level for England to take account of greater need. For next year, I will make available £2.274 billion, an increase over previous plans, and an increase over this year of almost £84 million. That is a cash increase of 3.8 per cent. and a real terms rise of 1.1 per cent.

There will be more doctors, more specialist staff, fewer administrators and more patients treated. The private finance initiative will supplement that amount even further. I am determined that there should be the best standards of health care in Wales for those who need it. On top of that, I am providing a special package of £4.5 million over the next three years for people with mental illness.

For the central Government roads programme next year, I propose to spend £154 million, which is a reduction of about £33 million on provision for the current year. Provision next year will enable starts to be made on the A40 Fishguard western bypass, the A4060 Mountain Hare to Dowlais scheme, the A55 Waen to Pont Dafydd, the A40 Carmarthen eastern bypass, and the A470 Lledr valley stage 2. In addition, the A55 improvements across Anglesey are important, and I plan to start the first stage of those improvements next year. Preparation work will continue on the A465 dualling between Abergavenny and Hirwaun, which is also of high priority

I want to seize the opportunities to take forward a number of major road schemes in partnership with the private sector under the private finance initiative. I am looking into the possibilities of the scope for projects to be privately designed, built, financed and operated.

I propose to make £100 million available next year for capital expenditure on local authority roads in Wales. Much of that will be on the 17 transport grant schemes for which I am already meeting construction costs, but work can start next year on the Ceredigion link road in Dyfed and on the eastern bay link, which forms the final section of the Cardiff peripheral distributor road. The Cardiff scheme could be suitable for a private finance approach and my officials will be discussing the feasibility of this with the local authorities. Preparation work can continue on a further six schemes, including improved access to Cardiff international airport, the Port Talbot peripheral distributor road, and the Porth and Lower Rhondda Fach relief road.

I now come to the overall local authority settlement. Provision to local authorities for capital programmes next year will total £508 million, excluding transitional costs of local government reorganisation. In addition, there are many opportunities for local authorities to supplement that through the private finance initiative, and I hope that they will take full advantage of them. Provision for local government reorganisation will be almost £42 million next year, on top of the £41 million provided so far. I am issuing a written announcement today about the distribution of support for compensation costs this year.

The overall local government revenue settlement for Wales provides for a substantial increase. The increase in total standard spending of 3.1 per cent. to £2,867 million recognises the needs of local authorities for increased spending on schools, which I expect to receive a large part of the increase.

On community care, I have confirmed the levels of funding announced last year already, and I now propose a further increase of £21 million for 1998–99 to £190 million. Within TSS, £331 million will be available for police authorities—an increase of 5 per cent. following last year's 11 per cent. increase, which underlines our commitment to combat crime with high-quality, high-visibility policing.

I propose to increase Government support for local authority spending by 2.1 per cent. to £2,517 million. That is around 88 per cent. of TSS, and represents £860 for every man, woman and child in Wales. Within that total of support, I propose to make available £459 million in redistributable non-domestic rates, £237 million in specific grants including police grants, £1,792 million in revenue support grant, and £29 million to damp down council tax increases arising from changes in allocations due to the move to unitary authorities.

Local government must play its part in restraining public expenditure, and capping is an important tool in ensuring that it does. Next year, I propose that an authority's budget should be considered excessive if it exceeds either its standard spending assessment by 12.5 per cent. or its base budget for this year by 3 per cent. An authority cannot be capped at or below its SSA. My capping proposals are provisional. I will make my final decisions in the light of local authorities' budget decisions and all other relevant considerations.

Full details of my capping proposals, local authority provisional SSAs and base budgets are being sent to unitary authorities today. The SSAs have been calculated using the distribution formula developed with the local authority associations and ratified by the Welsh Consultative Council on Local Government Finance. I will announce my final decisions on TSS, central Government support and SSAs in January.

I have noticed some speculation about the impact of this settlement on council taxes in Wales. The actual levels of council tax will be set by local authorities. In some years, it will be necessary for local authorities to raise a greater proportion of their revenue locally. None the less, I expect there to be a large differential between council tax levels in Wales and England for the foreseeable future.

For the second year running, we will maintain the rate of grant for housing association schemes at 58 per cent. I will provide more than £85 million for Housing in Wales. Together with private finance, that represents a capital provision of more than £150 million. It will enable it to provide 3,000 new homes as planned and help 700 families to move into low-cost home ownership, even though it is a reduction in my provision of 8 per cent. That is consistent with planned provision in England.

For local authority capital provision for housing, I will make more than £257 million available next year, of which £180 million will be devoted to housing renovation grants and will allow for a further 17,000 grants. We will maintain this year's spending, which will continue to make an enormous difference to the quality of Welsh housing stock. It is in recognition of this that housing expenditure per head in Wales will continue next year to be at least 50 per cent. higher than in England.

I am also allocating £2 million over the next two years to conduct a comprehensive housing condition survey across Wales. That will help to ensure that the huge amounts we spend on housing are focused on the areas of greatest need.

I shall now deal with provision for the arts and libraries. Revenue provision for the National Museum of Wales and the Arts Council of Wales will be maintained at the current year's levels. With further efficiency savings, I expect those bodies to have more to spend on their objectives than they have this year.

There will be a small increase in revenue provision for the National Library for Wales, so that the third library building can be brought into operation. That will enhance the storage capacity of the library, and strengthen its position as a pre-eminent repository of literature and culture. A modest increase for the Welsh Language Board will enable it to take forward the implementation of the Welsh Language Act 1993, and to develop its longer-term strategy for the language.

I am making provision of about £6.5 million for the Cadw agency. That will enable it to maintain its programme of grants for historic buildings at this year's level, and enable it to meet higher targets for listing.

I am maintaining funding for the Sports Council for Wales, which will enable it to take forward the initiative that I announced in September for the encouragement of sport for young people.

The Countryside Council for Wales plays a key role in providing conservation and environmental protection of the Welsh countryside. I want to see that role enhanced. I am boosting the council's budget by 24 per cent. over this year's original plans to a budget of £22 million, and I am increasing provision for Tir Cymen to bring around half the farmland in the pilot districts into the scheme. That dramatic increase demonstrates my stated commitment to promoting conservation and to preserving our natural heritage.

The Welsh Office budget next year will be the highest ever, and the private finance initiative will bring in more capital investment on top of that. Considerable sums of private money will be levered in by a whole range of programmes. In reaching my spending decisions, I have given boosts to health and to education, to training, to economic regeneration, and to preserving the environment. I believe that the decisions that I have announced today will benefit every person in Wales, and represent a solid investment for the future. I commend them to the House.

Mr. Ron Davies (Caerphilly)

I am surprised that the Secretary of State is so modest about his achievements in moving towards his ideological objectives. After all, we know that he wants to roll back the frontiers of the state and cut public expenditure. From his letter of 7 November to my right hon. and learned Friend the Member for Aberavon (Mr. Morris), we also know that he wants high and ever-increasing levels of council tax. So why on earth does he not admit this afternoon that he has cut £100 million in real terms from the Welsh budget, and that council tax increases in Wales next year will, according to local authorities' latest estimates, average 15 to 20 per cent.?

Perhaps the right hon. Gentleman will not own up to that because he realises that his statement is the Government's latest admission that, after 16 continuous years of office, they have produced an economy too weak to maintain our basic public services, and too small to provide the opportunity for work for all those who want it.

The cuts in the budget will fall most heavily on the capital programmes, especially the building of houses, roads and hospitals, and also on local authorities' regeneration programmes. Will the Secretary of State tell us his estimate of the number of jobs that will be lost to the Welsh economy as a result of those cuts? Will he confirm that the capital spending forecast for next year is 25 per cent. lower than spending this year?

Does the right hon. Gentleman realise the great concern that his budget will raise among those involved with economic development? Is it true that, of the 600 jobs that he is axing at the Welsh Office, about 23 per cent. will be the jobs of people central to the task of attracting inward investment? The department that deals with industry will be hit disproportionately hard, and the proposals that he announced concerning the Welsh Development Agency are little short of pathetic. The proposed increase of £12 million contrasts with the £23 million shortfall for the current year, and the agency is still having to rely on a programme of forced asset stripping, which is leading it to an uncertain and unsustainable future.

Is the Secretary of State surprised that he has still not been able to sort out the shambles of his Department's handling of European grants, and that, as a result, inward investment in Wales has collapsed from 13 per cent. to 8 per cent. of total United Kingdom investment in the current year?

Does the Secretary of State accept that his statement on the private finance initiative is based more on hope than expectation? The Government have yet to meet any of their targets for the programme or announce one successful significant scheme in Wales. My hon. Friend the Member for Cardiff, West (Mr. Morgan) described the PFI as the "probably fictitious investment scheme". Is that not the most appropriate description?

I welcome the fact that there will be a modest increase in resources for the police, but will the Secretary of State express regret at the fact that 16 years of Conservative policies have produced a society that is so divided and has such record levels of crime that these additional resources are now essential? Does he also accept that the new figures mean that there will be an increase in the police precept on council tax payers of 22 per cent? Is that not another hidden Tory tax on Wales?

Will the Secretary of State confirm that, excluding the ring-fenced new community care resources, the local authority SSA's total, standing at £2,438 million, is a reduction of 1.3 per cent.? Is not the figure £33 million less in cash terms than the current year's budget? Does he realise that inevitably there will be cuts in services, and that his claims of increased spending on education are neither honest nor credible? Expenditure on the popular schools initiative and the nursery vouchers scheme has attracted no public support in Wales whatsoever.

Does the Secretary of State realise how reviled his party has become because of the way in which it is now playing party politics with the education of other people's children? Governors are resigning from schools throughout Wales because they realise that the present problems with class sizes, standards and pupil-teacher ratios will all be made worse by the failure of the Government to meet next year's teachers pay award. Everybody understands the problem—parents, governors, teachers, educationists and pupils. Why cannot the Secretary of State understand it?

The cut in funding to Tai Cymru is particularly unwelcome, given the growing housing problem in Wales. There are 70,000 homes unfit for habitation in Wales, and homelessness has increased by 50 per cent. in the past 10 years of Tory government. Can the Secretary of State explain his strategy to deal with this growing housing crisis, given that the 14 per cent. cut of the £97 million forecast budget of Tai Cymru will mean a reduction in the number of homes built for social housing in Wales next year of 750?

On the question of the £65 million of receipts from the sale of the assets of Tai Cymru, will the Secretary of State confirm that that money will not be available for expenditure in Wales—least of all in the housing programme—but that it will be recaptured by the Treasury?

Finally, will the Secretary of State agree to an early debate on the proposals in the Welsh Grand Committee? Does he realise that, when the people of Wales understand that his "pay more, get less" policies give poorer services and less investment in the future, he will never be able to command popular support?

Mr. Hague

On a day when job vacancies have reached a record level, unemployment has fallen again and interest rates have been reduced, only the hon. Gentleman could describe the economy as weak. [Interruption.] The hon. Gentleman described the economy as "weak", and that is the background against which he did so.

The hon. Gentleman has criticised those areas in which I said that Government spending would be reduced, as he is entitled to do. Does that mean that he is not in favour of the increases which I have announced? Unless we are prepared to make some reductions, it is not possible to make increases elsewhere.

Or does the hon. Gentleman think that £6,865 million is not the right figure for expenditure in Wales? He has not told the House whether he thinks expenditure should be higher or lower, or what the Labour party would have as the total of Government expenditure in Wales. To call for higher spending for programme after programme comes a bit rich from a party that wants to waste millions of pounds of taxpayers' money on setting up an assembly in Wales. I find the hon. Gentleman's general approach extremely unconvincing.

The hon. Gentleman asked about the £65 million that will be raised by the sale of the Housing for Wales loan book. That money will be spent in Wales, which is why it is additional to the Treasury provision of £6,800 million. The two sums added together give the total budget. So the hon. Gentleman is mistaken.

The hon. Gentleman asked about council tax. He claimed that I had said that there should be ever-increasing levels of council tax. I have said that, in some years, it will be necessary for local government to find locally a larger proportion of its revenue. It is not necessary in every year. In that, I have agreed with the stated views of the Assembly of Welsh Counties.

When the council tax was introduced, the minutes of the Consultative Council on Local Government Finance showed that the assembly considered

that the introduction of the council tax provided the Government with an opportunity to enable local government to raise a greater proportion of its revenue from local taxation. At present local Government was able to raise less than 10 per cent. of its revenue locally, insufficient to ensure local accountability". What I have said is entirely in line with that.

The hon. Gentleman said that people concerned with economic regeneration would be worried by this statement. I have increased the provision for regional selective assistance, increased the grant to the Welsh Development Agency, and redirected training resources in a way that aids economic regeneration. That is extremely good news for people who want to see continued economic progress and development in Wales.

In relation to the private finance initiative, as I have said, I shall announce the first project to be contracted extremely soon. On the question of local government revenue overall, I am increasing the Government's provision for local government revenue by £51 million in total. In relation to the housing budget overall, I am confident that the budget that I have provided will enable Housing for Wales to meet its stated plans, and that I have maintained a housing budget for Wales that is proportionately far ahead of the budget in England.

If the hon. Gentleman wishes to criticise the reductions in the areas where I have set them out, it is incumbent upon him to say where he would find the money to avoid them, and to tell us how he would square that with the 10p tax rate advocated by his hon. Friend the Member for Dunfermline, East (Mr. Brown). He will find that that is a difficult task.

Sir Wyn Roberts (Conwy)

I welcome my right hon. Friend's statement, and, in particular, its strong thrust towards economic development, not only in the industrial and business sphere but in the rural areas and through the Countryside Council for Wales, which will receive an extraordinary increase in its budget of 24 per cent. next year.

Does my right hon. Friend agree that the increase in regional selective assistance and the increase in the WDA's funding for training and education, coupled with today's cut in interest rates and the fall in unemployment, mean that the prospects for growth in the Welsh economy next year can be viewed with far greater confidence?

Mr. Hague

My right hon. Friend is right; the economic outlook is very good. The increased provision for regional selective assistance that I have set out today reflects the new momentum that is behind the inward investment effort. That is evidenced by the 30 per cent. increase in applications for regional selective assistance to which I referred. Set against the background of a lower taxed and more lightly regulated economy than is the case throughout most of the rest of Europe and the steady growth of the United Kingdom's economy as a whole, the outlook is very promising.

Mr. David Rendel (Newbury)

The Secretary of State has told us that Government funding for local authorities in Wales next year will amount to 88 per cent., that the increase in Government funding is about 2.1 per cent. and that the increase in local authority revenue spending altogether is to be 3.1 per cent., leaving out of account relief spending and capital spending for the moment.

Does the Secretary of State accept that those three figures alone—merely for local authority revenue spending—imply an average increase of well over 10 per cent. in council tax, which will mean that the people of Wales, rather than the Government, will have to pay for the increases in spending on education and other services of which he is so proud? Does he accept that that will mean that the people of Wales will lose further confidence in the new unitary authorities which are to be set up on April fool's day next, which will turn out to be an expensive and unpopular April fool joke?

Mr. Hague

The position is as I have stated it to be. The actual council tax levels for next year will be set by local authorities. The figures that I have given today imply that authorities should raise a slightly larger proportion of their total revenue locally, but that is a marginal change, which will still leave a great differential between council tax levels in Wales and those in the rest of the United Kingdom.

Mr. Walter Sweeney (Vale of Glamorgan)

I thank my right hon. Friend for including in his statement on road spending provision for preparatory work on the new road link with Cardiff international airport. That will be very good for the economy of the Vale of Glamorgan. I also thank my right hon. Friend for following the 11 per cent. increase in last year's police budget with a further 5 per cent. this year. The Vale has already been given 14 extra police officers this year; they are much needed, and very welcome.

Finally, I thank my right hon. Friend for the extra provision for education and health. Would not the Opposition's demands for even more spending carry more weight if, instead of advocating the spending of millions of pounds on a building for politicians, they wanted to spend money on children and patients?

Mr. Hague

My hon. Friend is right, and I am grateful for what he has said. He rightly draws attention to the preparatory work on improved access to Cardiff international airport, which I know is important to his constituency and to the local economy; he also identified the importance of improved provision for education and health.

The health spending that I have announced today should enable 27,000 more out-patients and 46,000 more in-patients and day cases to be treated next year. It should also enable 100 more medical staff to be employed in the health service as a whole. As my hon. Friend said, that is a much better way in which to spend the taxpayers' money than setting up a new talking shop in Cardiff.

Mr. Ted Rowlands (Merthyr Tydfil and Rhymney)

Why is it so splendid and vital to cut direct taxation nationally, but then decide to increase direct, compulsory council tax, as the Secretary of State has done?

Mr. Hague

There is no connection between any national tax changes and the size of the Welsh block, which is determined by a formula: it is 6.02 per cent. of changes in the amount for comparable English programmes. If I were to provide a different amount in local government revenue support next year, I would have to find it from other components of the Welsh block—or vice versa. Those who call for more revenue support for local government must be prepared to say where it would come from in the rest of the Welsh block, or to say—as Opposition Members so far refuse to say—that the total amount to be provided is not the right amount.

Mr. Andrew Hargreaves (Birmingham, Hall Green)

Does my right hon. Friend accept that, as one who is unaccustomed to attending the House for statements about Wales, I feel that the higher spending that he has announced—I believe that he mentioned extra spending of as much as £100 per head on health, which is £100 more than is spent in the rest of the country, particularly Birmingham—will strike my constituents as inexplicable?

Nevertheless, does my right hon. Friend agree that that spending demonstrates the advantages to Wales of membership of the Union, and the disadvantages that would ensue should Labour's policies for Wales be implemented?

Mr. Hague

I assure my hon. Friend that the differences are explicable. There are greater problems in public health in Wales than in many other parts of the United Kingdom. For instance, the proportion of people with limiting long-term illnesses is significantly higher in Wales, which justifies continued higher expenditure.

My hon. Friend is, however, right in saying that the higher expenditure shows the benefits of Wales being part of the United Kingdom. We should do nothing to endanger the part that it plays in the United Kingdom, and in this United Kingdom Parliament.

Mr. Barry Jones (Alyn and Deeside)

Will not the fledgling unitary authority of Flintshire begin its life in a seriously underfunded state? Is it not inevitable that council tax will go through the roof in Flintshire? Should not the excellent Flintshire councillors have a better deal, so that they can aim to provide more teachers and houses, and better community care? The settlement is unsatisfactory, and there should be a rethink for Flintshire, at least.

Mr. Hague

As I have explained, it is important to choose between different priorities. The below-average provisional SSA increase for Flintshire is due mainly to decreases in its share of secondary pupil numbers and updating of the financial database, which determines the relative weight of each service within the calculations. Naturally, I shall take account of the views of local authority associations on all the figures that I have announced, and make my final announcement in January.

I shall look at the point that the hon. Gentleman has raised, but I reiterate that we are choosing between many competing priorities. I believe that I identified the right priorities in my statement.

Lady Olga Maitland (Sutton and Cheam)

May I welcome the generous increase in resources to train young people, which will enhance their future job prospects? Does my right hon. Friend agree that it would be a cruel trick if those young people ever became victims of the social chapter and a minimum wage, which would devastate their job opportunities and their chances for life?

Mr. Hague

My hon. Friend is right. By the end of the next financial year, 8,500 young people will have started modern apprenticeship courses in Wales, which is an encouraging sign for future job prospects and skills in the Welsh economy. We would do no favour to young people in Wales or elsewhere in the United Kingdom if we adopted job-destroying measures, such as a minimum wage or the social chapter, which would deny rather than improve prospects for a whole generation.

Mr. Donald Anderson (Swansea, East)

Is the Secretary of State content with the fact that discretionary educational grants in Wales have virtually dried up, with the result that many professions are now no longer available to working-class children?

Mr. Hague

I have explained to the House my overall priorities within education. I have increased the total provision for capital spending on local authority schools as well as the provision for further and higher education funding councils, so the hon. Gentleman can see that I am increasing resources for several educational areas. It is impossible to spend as much as we would like on every aspect of education at the same time.

Mr. Dafydd Wigley (Caernarfon)

Does the Secretary of State realise that, despite his smiling face and silver tongue, he cannot hide the central con in his statement? He pretends that great priority is being given to education, but the increases do not reach primary and secondary education in the state sector, which is the most critical area for most people.

Does the right hon. Gentleman realise that, once community care is taken out, Government support will increase by only 1.8 per cent.? The Government's figure for inflation is 2.5 per cent., and teachers' salaries are likely to rise by 3 per cent., so, even if educational spending is to stand still, council tax needs to rise by 15 to 20 per cent. The fallacy of this statement is that the people of Wales will pay just to stay where they are in respect of education.

Mr. Hague

The overall increased capital provision for schools will feed through across the state sector. We must be clear about that. As for the total revenue settlement, the increase in total standard spending gives authorities room to make substantial increases in educational provision. Naturally, I look to local authorities to continue to improve their efficiency, just as central Government are improving theirs.

If the unitary authorities carry through all the changes to their payrolls for which I am offering to fund the mandatory costs for the next couple of years, local authorities' running costs should be about £30 million less in total. More money is therefore available to local government than appears on first examining some of those figures.

Mr. Roy Hughes (Newport, East)

Is it not deceitful of the Secretary of State to paint such a rosy picture of the Welsh economy, when independent, impartial observers are saying clearly that Wales has been reduced to one of the most impoverished areas in western Europe? Why will he not be straightforward with the House this afternoon, and confirm that council tax in Wales is likely to increase by more than 11 per cent.—double the expected increase for England?

Mr. Hague

We have dealt with the council tax argument. Council tax levels, as I have explained, are to he set by local authorities, but I have said very clearly in the past several weeks that I would expect a larger proportion of revenue to be funded locally by local authorities in the coming year.

On the overall economic picture, I believe that the hon. Gentleman does an injustice to Wales. There are problem areas. There are pockets of high unemployment—I referred to that in my statement, and I acknowledge it—hut the overall rate of unemployment in Wales, as in the rest of the United Kingdom, is now lower than that in the other major European economies. That is a very different picture from the picture that we saw in previous decades. That picture has improved further with today's statistics, and it will improve still further in the coming year.

Mr. Nick Ainger (Pembroke)

Is the Secretary of State aware that the statement will confirm the worst fears of many of my constituents, and of constituents throughout Wales, especially if they are parents or school governors or if they are one of the more than 100 people in my constituency who newly joined the dole queue this month—as the figures published today confirm?

The Secretary of State is not, in real terms, increasing the expenditure of the Welsh Development Agency to make up the £23 million cut, which meant that many very important projects had to be ended—or not begun—in my constituency and elsewhere in Wales. His announcement of an additional £12 million will not make up any of that £23 million, because the statement says that the WDA's spending for next year will remain approximately the same as for this year. That means that the £23 million cut will be made this year and next year.

A significant number of projects will not be able to go ahead, and many of those people who joined the dole queue last month in my constituency will remain on it directly as a result of the Secretary of State's failure to overcome that £23 million shortfall.

Mr. Hague

The hon. Gentleman must consider the provision for the Welsh Development Agency, which is a £12 million increase on what was planned in the Government's grant alongside the other measures that I announced—the increase in the budget for regional selective assistance and the attention that I have given to the training budget, especially for young people, which is good news for people in the hon. Gentleman's constituency, where the unemployment record has not been as good in the past 12 months as it has been in Wales as a whole.

If the hon. Gentleman wants me to increase further the WDA's budget, he must be able to say where, in the other programmes, that money should be found. I have not heard Opposition Members make any suggestions about that today.

Mr. Alan W. Williams (Carmarthen)

May I welcome just one part of the statement—the announcement about the Carmarthen eastern bypass? We have waited for about 20 years, and we suffer appalling problems of congestion throughout the year, especially in summer. The bypass is badly needed. I also welcome the improvement of the links to Ceredigion, because those links are frustrating the economic development of that region.

There are some small problems with the Carmarthen eastern bypass. We have had major public inquiries, but we do not want another full-blown public inquiry. We want those little problems to be ironed out and the project to go ahead as soon as possible.

Mr. Hague

I am grateful to the right hon. Gentleman for his welcome. I am trying to ensure that the road projects that have the highest priority, and the road projects that I have described in the statement, are those that are of strategic priority to the whole of Wales. I believe that there is a strong case for the projects that the hon. Gentleman mentioned, and I have, as he says, included them in my statement. I will consider the issue he mentioned of the specific problems with those roads projects, and I should be happy to discuss them with him further.

Mr. Martyn Jones (Clwyd, South-West)

Will the Secretary of State explain the position in Clwyd? He has received representations from local authorities in Clwyd, and they have explained to him in great detail that there is nursery provision in Clwyd for 100 per cent. of four-year-olds, provided outside the SSA. That is funded by a Labour local authority. If he introduces nursery vouchers, the people of Clwyd know that that will disrupt nursery education in Clwyd; it will take it away from the parents in Clwyd. I want to know what he will do about it.

Mr. Hague

There is no reason for local authorities to have anything to fear about nursery provision if they are providing a service that people want to use. The money that will be recouped from local authorities to help to finance the nursery vouchers will not exceed the cost of the voucher. There will be more money in total; it will be a net injection of cash into the system, and it will give parents choice. I do not understand why we should not give parents choice in those matters. I had supposed that the Labour party had become persuaded of the need for choice in recent times. Certainly its members often appear to want to exercise it, but evidently that is not the case today.

Mr. Peter Hain (Neath)

Is this not a shamelessly cynical exercise by the Secretary of State in bouncing local authorities into imposing swingeing council tax increases? As those local authorities in Wales are almost all Labour-controlled, that will be very convenient for the Conservative party in the run-up to the next general election.

I specifically appeal to the Secretary of State to intervene to require his officials to reconsider the disaggregation of West Glamorgan county's budget. The way in which it is being done is penalising Neath and Port Talbot compared with Swansea, to such an extent that, in Heol-y-Ffin in Trebanos in my constituency, whereas all the people in that street at present pay the same council tax, from April 1996, people living on the Neath and Port Talbot side of that street will pay £100 more than people living on the other side.

It has nothing to do with the way in which the two new authorities distribute their spending and budgetary plans. The reason that that discrimination is occurring is to do with the Secretary of State's own Welsh Office incompetence and obstinacy.

Mr. Hague

I do not think that it is to do with anyone's obstinacy. My officials have worked on the disaggregation very hard, together with people in the local authorities. A great deal of work has gone on through the Welsh Consultative Council on Local Government Finance, so that the disaggregated figures and the notional amounts are agreed figures, and everyone's best understanding of what the figures should look like.

Of course I will be happy to consider the matter that the hon. Gentleman draws to my attention, but I hope that he appreciates that the disaggregated figures and the notional amounts are already the product of a great deal of detailed work, taking account of the many anomalies that might arise. I will certainly consider that matter.

Mr. David Hanson (Delyn)

Was the Secretary of State able to take account of representations made to the hon. Member for Cardiff, North (Mr. Jones) by Flintshire specifically about the staff from Clwyd county council who have now adopted Flintshire as their new authority, and about the position of Theatre Clwyd, both of which are aspects of the settlement that cause concern?

Can the Secretary of State confirm to the House that, wherever in the statement he has used the phrase

maintained at current levels of expenditure", as he has with the tourism budget and with the libraries and museums budget, he means a cut, because inflation has increased?

Mr. Hague

I have already mentioned Flintshire in my answer to the hon. Member for Alyn and Deeside (Mr. Jones).

Yes, maintaining budgets flat means that the cash amount remains the same, but all those organisations have opportunities to reduce running costs so that more is available to be spent on services. In the case of the National Library for Wales, as the hon. Gentleman will recall, I announced a cash increase, so there is an increase in the resources available to introduce a much larger service, to bring the third library building into use.

Mr. Don Touhig (Islwyn)

Will the Secretary of State comment on the reorganisation of local government in Wales? The cost of that reorganisation has been put at £150 million, and the Society of County Treasurers has said that only districts with populations of 350,000 will achieve a payback. Bearing in mind the heavy on-going cost of local government reorganisation, will the Secretary of State assure us that the £42 million for local government reorganisation next year to which he referred in his statement will be sufficient, and will not lead to cuts in services? Is the £42 million new money?

Mr. Hague

Yes, the £42 million is new money, in the sense that it is additional to the other amounts that I have announced in support of local government next year. The provision that I have made for the years up to and including 1998-99 will mean that the Welsh Office's support for transitional costs will total about £104 million over a five-year period.

The amount that I have announced in the statement will cover all the mandatory costs that my predecessor indicated would be covered. It will also cover a proportion of the discretionary costs of local government reorganisation. It would be wrong to meet all those costs, because that would lead to an increase in bids and an increase in the costs over time. We do not want to see that occur.

Mr. Win Griffiths (Bridgend)

I cannot believe that the Secretary of State is so unintelligent that he does not realise that this is a "Fantasy Island" budget, replete with Orwellian newspeak. When the Secretary of State talks about an increase in the Welsh Office budget, he actually means a cut.

The Secretary of State has announced cash increases for local government, but if we take into account inflation and local authorities' spending this year, we find that their funds will be cut. The Secretary of State has only to look at the statistics on local government education produced by his own Department. They show that the pupil-teacher ratio has increased in the past few years. More and more children are being taught in classes with more than 31 pupils, and last year the local authorities reduced their administrative costs by more than £8 million. Yet the Secretary of State is providing those authorities with less money to run the education system.

Will the Secretary of State confirm the figure that he gave to my right hon. and learned Friend the Member for Aberavon (Mr. Morris) of a minimum 11 per cent. increase in the council tax budget in Wales? If authorities are to meet existing levels of service with reduced funding from the Welsh Office, they will have to increase their council tax by more than 11 per cent.

Mr. Hague

Let us be clear that the Government's support for local government revenue funding will be £51 million higher next year. That will amount to a lower proportion of total standard spending by a small sum, which is why we need to increase the revenue raised locally in the coming year. I have already referred to that fact. If the hon. Gentleman wishes to direct more resources to that area, he must say where he would find them. He must be able to tell us where he would get them. If he is not happy with the total budget of £,865 million—as he implied in his question—he must confirm whether he has squared his views with the hon. Member for Dunfermline, East, and whether he believes that extra money should be raised through higher taxation, higher borrowing or reductions in spending elsewhere. Unless Labour Members are willing to confront that basic problem inherent in all their remarks, their criticisms of today's statement will have no credibility.

I find it extraordinary that Labour Members have not uttered a single word of welcome for a statement which announces this level of provision for health, education, training and the Countryside Council for Wales. They are professional gloom-mongers—but they have not even been successful in that regard this afternoon.