HC Deb 12 December 1996 vol 287 cc405-19 3.31 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, my proposals for a council tax damping scheme, provisional capping principles and notional amounts for local authorities are available in the Vote Office. Full details of my decisions will be published in due course. [Interruption.]

Madam Speaker

Order. Hon. Members are having difficulty hearing. Will those who are leaving please do so quietly now? We have business to conduct here.

Mr. Hague

Thank you, Madam Speaker.

Next year, the Welsh Office will have its biggest budget ever, at £6.9 billion. That is £100 million more than the budget for this year and £70 million more than the original plans. Provision for Wales is reached through the block and formula arrangements. For this survey, the consequentials from local government revenue provision in England have been calculated on the basis of total standard spending rather than aggregate external finance. That is essentially a technical change, but it brings significant benefits to the Welsh block.

I intend to make the money available go even further next year by making the most of the private finance initiative. Six deals have already been signed, with a total capital value of £25 million, and more are in the pipeline. In all, we hope to generate capital spending of around £350 million through the PFI over the next three years.

I am making available £0.5 million to assist local authorities in developing a range of pathfinder PFI projects, and I have asked the Higher and Further Education Funding Councils to look at the scope for providing similar assistance in their sphere.

The Welsh Office will operate efficiently and at minimum cost. Over the next three years, the costs of running the Welsh Office will fall by more than 8 per cent. I am requiring all non-departmental public bodies in Wales to make efficiency savings in their running costs too, releasing overall savings next year of about £1.5 million.

The decisions that I am presenting today are clear choices that build on success. My aim is to increase personal prosperity and to improve quality of life. I am therefore making health, jobs and education my priorities, even though that means reductions in some other programmes.

In my statement last year, I increased health spending in Wales for the current year by £84 million. Today I am announcing an additional £94 million for next year, an increase over this year's plans of more than 4 per cent. Health spending in Wales is 14 per cent. more per head than in England. This is a very good settlement for health authorities and trusts, but I look to them to continue to make efficiency savings and to drive down costs—particularly management costs—so that the savings can be transferred to patient care.

Health service capital expenditure of £40 million is going through the PFI process at the moment. I can also announce today a package of conventionally funded schemes worth more than £55 million, including £31 million for the provision of a new accident and emergency service and other developments at the University hospital of Wales; £20 million, subject to health authority support for the business case, for a cancer centre in north Wales; and £4 million for a medium secure unit also in north Wales.

The total amount available for training next year will be £136 million, about the same as the expected spend this year. Our aim is to equip Wales with the skills needed for the record-breaking number of jobs now being created. I am increasing provision for modern apprenticeships to £27 million, an increase over spending this year of nearly £12 million—more than 75 per cent.—allowing a further 4,300 young people to begin modern apprenticeships.

Some £2.8 million will be available for adult technicians, which is more than twice as much as provided this year. Support for careers service companies will increase by 18 per cent. on this year's spending. To accommodate those increases, we will have to cut back elsewhere. Against a background of falling unemployment, there will be a reduction in the training for work programme.

In addition to the provision I am making available through standard spending assessments for local authorities, I am providing directly £566 million for education in Wales. This includes £177 million for further education and £237 million for higher education through the funding councils. Total capital provision for schools will be £68 million, including £9 million for the popular schools initiative; £5.5 million for schools projects under capital challenge; and £1 million for the technology schools initiative. Together with the increase of more than 20 per cent. in the past two years, that brings the level of capital provision to its highest ever for schools in Wales.

In giving extra money to some areas, I must give less to others. The central Government roads programme will be reduced next year to £113 million. The first priority is the maintenance of the existing network, but work will also continue on three schemes starting this financial year—the A40 Carmarthen eastern bypass, the A4060 Mountain Hare to Dowlais, and the A55 Waen to Pont Dafydd. Work will start next year on the A470 between Dolwyddelan and Pont Afanc. Work will continue on the proposed PFI schemes—notably the A55 dualling across Anglesey—and on a programme of important structural renewal, including the reconstruction of the A449 between Usk and Newport.

I am also reducing net capital provision for Housing for Wales next year to £60 million. That will support a gross investment programme by housing associations of well over £100 million and will provide around 3,000 new dwellings next year. It will be provided on top of gross investment of more than £1.4 billion since Housing for Wales was set up in 1989. The social housing grant will be set at 56 per cent, which represents a generous level of support and maintains downward pressure on rent levels.

I am providing £215 million for local authority housing. That includes £164 million for private sector housing renovation, incorporating £14 million of challenge funding for area renewal. It will bring total investment in private housing renovation to more than £1.1 billion since 1990. To encourage the transfer of housing stock to local housing companies or housing associations, I am introducing a three-year holiday from the 20 per cent. levy on capital receipts and a guarantee that local authorities can use 25 per cent. of receipts to spend on housing. In all, I propose to make £443 million available to local authorities for capital expenditure next year, including the provision for schools and housing that I have already detailed.

While next year's local authority capital settlement is a reduction on this year's level, I have been careful to protect schools—a priority—and local authority capital provision next year will still be very considerable. In fact, per head of population, it will be two and a half times that for England.

I am providing more than £76 million next year for local authority roads. That includes provision of nearly £54 million for transport grant schemes to meet the estimated costs of committed schemes.

I am also providing initial funding for the design costs associated with five new schemes, although future funding depends on new arrangements being agreed by local authorities to avoid their cost overruns, which have caused serious problems in recent years. These schemes concern the Tredegar Park interchange, the Port Talbot peripheral distributor road, the Church Village bypass, the Wrexham industrial estate, and the Ceredigion link roads.

The £39 million available for capital and revenue under the strategic development scheme will fund all forward commitments in the next year and an allocation of £11.6 million, which authorities can decide for themselves how to use.

I am announcing today projects with a total value of £32.6 million to be supported under the new Welsh capital challenge. Allocations for next year will total £20 million. As well as the schools projects that I have already mentioned, this innovative approach will support a wide range of projects to help create or safeguard 1,200 jobs and, in partnership with the private sector, provide further employment opportunities. These include industrial parks in Anglesey and Carmarthen and tourist developments in Llandudno and Porthcawl.

The reductions of which I have spoken will allow us to increase spending in other areas on top of the huge rise in health spending that I have already announced.

For local authority revenue spending, I propose to set aggregate external finance, AEF, at £2,578 million—up £64 million or 2.6 per cent. That is £884 for every person in Wales, over f150 more than in England. I propose to set total standard spending for next year at £2,931 million, which is 2.3 per cent. up on this year, and includes £169 million for community care and £341 million for police authorities. The police settlement is up 2.7 per cent., and builds on increases in the past two years of five per cent. and 11 per cent. respectively.

With that level of support, there is no reason for the average increase in Welsh council tax to be any higher than that in England; and the large difference between English and Welsh council tax levels will continue to be at least as great as last year. These decisions, though, are for local and police authorities to take bearing in mind the impact on council tax payers. They should certainly not view capping limits—which I will come to in a moment—as a target. They are a ceiling.

I propose to continue damping, and within AEF I am making £18.3 million available so that the maximum increase in council tax in Wales should be no more than 15 per cent., excluding community council precepts and the cost of discretionary non-domestic rate relief. The majority of increases will be capped well below that level.

For next year, I propose that a local authority's budget should be considered excessive if it exceeds its standard spending assessment by 12.5 per cent. or involves an increase over its base budget for this year of more than 1.8 per cent., or more than the cash increase in its SSA, whichever is greater. I shall consult local government in Wales on the basis for my capping and damping proposals.

These principles are provisional. Actual principles will not be set until local and police authorities have set their budgets for next year. My Department is writing to Welsh local authorities notifying them of their provisional SSAs.

Budgets for the national library and the national museums and galleries of Wales will be held constant next year, as will those of the Sports Council, the Wales tourist board and CADW.

The budget for the Arts Council for Wales will rise to £14.5 million, which will enable it to maintain its current level of support for the arts in Wales and reorganise its senior management structure. It will also provide £0.5 million over the next three years to support dance and drama students.

The Welsh Language Board will receive a significant increase, bringing its budget next year to £3.7 million, enabling it to discharge its new responsibilities of grant-aiding the four major Welsh language organisations.

I am providing £23.2 million for the Countryside Council for Wales, an increase of £1.2 million over this year. That comes on top of last year's large increase and the additional funds that I have made available in-year to address the consequences of the Sea Empress spillage.

Agriculture forms part of the Welsh Office budget, although it is not part of the block. Domestic expenditure on agriculture in Wales will be £66 million, an increase of £8 million over this year's spending. Taken with £192 million from the European Union, total provision next year will be £258 million. While that is less than the present year, it is mainly due to the revaluation of the green pound. We are increasing the hill livestock compensatory allowance rates for cattle by 105 per cent. and 194 per cent., and are maintaining the rates for sheep. Otherwise, provision for bovine spongiform encephalopathy is additional to the resources that I am announcing today for Wales, since it is dealt with on a UK basis, but Welsh farmers are benefiting from £3.3 billion of Government support to maintain the industry as a whole.

My top priority is the creation of a vibrant economy in Wales, in which the economic development agencies in Wales will continue to play a major part. Cardiff Bay development corporation will spend £53 million next year on the barrage, reclamation and development, thus attracting more private investment.

The gross budget of the Development Board for Rural Wales next year will be more than £20 million, which matches this year's spending. I have asked it to focus inward investment support on the western part of its area.

During this year, I have added £25 million to the Welsh Development Agency budget. I am adding a further £20 million for next year, which takes its grant in aid to £85 million, and the gross provision to £150 million.

The settlement will allow the agency to accommodate additional expenditure arising from the Lucky Goldstar project, and to continue its wide range of other programmes. Our success with LG has been spectacular, but I do not want resources to be concentrated in south-east Wales at the expense of other areas. I therefore want the agency, with the Land Authority for Wales, to prepare key strategic investment sites across Wales.

This year has been a tremendous year for inward investment. More than 130 projects have been secured. Those projects promise to create more than 15,000 new jobs, and generate capital investment of more than £2.4 billion.

The regional selective assistance budget next year will be the biggest ever at £70 million—27 per cent. more than this year. That demonstrates our commitment to bringing new jobs to Wales, and through that and other industry support schemes, we are helping Welsh companies to take advantage of our record inward investments.

Taken together, the measures that I have announced today provide for economic development of more than £300 million next year. That is a 14 per cent. increase on planned spending for this year, and represents a huge investment in the future of Wales.

I have set before the House my clear priorities. They are clear choices, and to do anything else would compromise the successes of recent years. What we propose now will build on those successes.

Mr. Ron Davies (Caerphilly)

I thank the Secretary of State for his statement. Those of us lucky enough to read yesterday's Western Mail were treated to a preview. I want to put on record my protest to you, Madam Speaker, and to the Secretary of State, for what I regard as a gross discourtesy to Welsh Members of Parliament. It is clear that the Western Mail received an accurate and deliberate briefing from the Welsh Office.

To make matters worse, the information that it was given on Tuesday is precisely the information that the Secretary of State chose to withhold from Welsh Members at last week's meeting of the Welsh Grand Committee. Does that not show yet again the contempt that the present Administration has for our democratic procedures, especially for the way in which Welsh affairs are run?

Earlier this week, the Deputy Prime Minister strongly attacked what he called the "leak culture". Does the Secretary of State agree with that view? If so, will he now apologise to Welsh Members and to you, Madam Speaker, for his actions and for those of people working on his behalf in deliberately leaking the information contained in today's statement?

There is clearly a difference of opinion between us on the Government's overall spending plans. Do the plans that the Secretary of State announced confirm the figures in his press release of 26 November? That press release stated that there will be a reduction in real-terms expenditure in the total Welsh Office budget next year of 0.9 per cent., a cut of 2.3 per cent. the following year both in cash terms and in real terms, and a further cut of 1.6 per cent. by the end of the decade.

Does the Secretary of State understand that those cuts reflect badly on the economic record of a Government who are failing to meet their inflation, borrowing and growth forecasts? Above all, the Government are not taking the right decisions on investment, either in the private sector or in their own spending programmes.

The Secretary of State should realise that his statement shows what everyone now recognises as the Government's true character: they do not plan for the future, and their priority is to promote privilege for the few, not opportunities for the many. Why should anyone believe his forecast for local government—the largest sector—when we all know that he is, at best, dissembling? His total standard spending for next year is £2,931.1 million. That is a cash increase of 66.3 million on last year's expenditure, but spending for the current year in local government is already £207 million more than next year's TSS. Inevitably, therefore, inadequate resources will be available to meet the demands placed on local authorities to provide essential public services.

Why has the Secretary of State not noted the warnings of the Welsh Local Government Association of a meltdown in services? Does he realise that, even with the—I understand—1.8 per cent. capping limit that he has announced today, council tax increases are likely to be substantial for the average band D property in a number of local authorities? The increase is likely to be over £65 in the Vale of Glamorgan, over £60 in Aberconwy, over £82 in Carmarthenshire, over £65 in Pembrokeshire, over £81 in Neath and Port Talbot, over £63 in Cardiff and £76.50 in Cardiganshire. Even if the Secretary of State achieves his maximum figure of 15 per cent., average increases in Wales are still likely to be some 12 or 13 per cent. in council tax bills.

Does that not show that any small benefit that was given with one hand in the Budget will be more than taken back in next year's Tory tax increase? Does the Secretary of State realise that, even with the tax increases, the quality of services will fall, with education—which takes 50 per cent. of total local government spending—bearing the brunt of the cuts? Is that not a clear example of the Government's sacrificing the long-term future of our country?

Will the Secretary of State acknowledge that, over the past two years, pupil numbers in Wales have increased by 10,873, while teacher numbers have fallen by 69? Why should educational opportunities for our children be declining in that way, while the Government plan to waste £45 million next year on the right hon. Gentleman's unwanted and bureaucratic nursery voucher scheme?

This year's Welsh Office spending on the national health service, including the extra £30 million that the Secretary of State added in his winter supplementary estimate, is £2,305 million. I think that the Secretary of State and I agree on that. That figure, however, has produced a current-year spending cash crisis in the NHS, with an astonishing one in three trusts in Wales in deficit at the halfway point this year. If we take into account that winter supplementary estimate of £30 million, there is in fact an increase of £64 million, not £94 million as the Secretary of State tried to claim a moment ago. I fear that he is dissembling again.

How much of next year's apparent cash increase will be swallowed up in covering the deficits in trust and health authority budgets at the end of the current financial year? In particular, what proposals has the Secretary of State to assist general practitioners and hospitals with their emergency medical admissions in the coming winter, to avoid a repeat of last year's disasters?

Does the Secretary of State recall last year's extravagant claims about the PFI? Does he recall talking of 25 projects with a total value of £1 billion, and the claim that he made on 13 December last year? He said then: We will announce very soon the first major PFI project in Wales".—[Official Report, 13 December 1995; Vol. 268. c. 1002.] Will the Secretary of State now confirm that the only agreed projects under way to date are the £6 million car park and road scheme at UCH Cardiff, and the Osiris project in his own office? Will he now apologise for having grossly inflated his estimates last year, and will he reflect on the words of Mr. Ken Gill, Welsh managing director of Jarvis and Son, who said on Tuesday this week that he could not wait for the election of a Labour Government who could sort out the PFI mess and use the PFI to supplement public money, not to replace it?

May I remind the Secretary of State of our firm support for the development agencies? Is it not the case, however, that the Welsh Development Agency will still come under great strain, even with expenditure at the £85 million that the right hon. Gentleman has just announced? In real terms, that £85 million is not much greater than the £70 million allocation that existed before his predecessor embarked on a programme of savage cuts in the agency budget.

Will the Secretary of State acknowledge that the WDA's budget has been going up and down like a yo-yo, courtesy of the prevailing political dogma in the Welsh Office? Will he confirm, therefore, that, given his budget and its commitments to the LG project, the agency will face a difficult year? Given that that is true, how can he expect the agency to develop a long-term strategy when it is subject to such dramatic and capricious changes in its funding? Why has the Secretary of State allowed the management and the administrative costs of the top 10 quangos in Wales to increase by £52 million—an increase of 95 per cent.—while simultaneously making cuts in the budget of a whole sector of Welsh Office activity?

Let me list the cuts that I have identified from the right hon. Gentleman's statement. There are cuts in local authority revenue expenditure and in local authority capital programmes, a cut of 30 per cent.—£25 million—in the housing budget, a cut in road programmes of 30 per cent., and a cut in Higher Education Funding Council expenditure of 5 per cent. There are cuts in the budgets of the Further Education Funding Council and of the Development Board for Rural Wales, and cuts in real terms in the budget of the Countryside Council for Wales. Despite the Secretary of State's claims, if the comparison is made in real terms with the 1995–96 outturn cut, there has been a cut in the budget of the CCW, his pet quango.

There have been cuts in the budgets of the national library, the National Museums and Galleries of Wales, the Sports Council for Wales, the Wales tourist board, the CADW agency and the agriculture budget. What assessment is the Secretary of State making of the impact of those cuts on the Welsh economy? Unfortunately, we did not receive any indication that the Secretary of State even understands, let alone has started to assess, their impact on the Welsh economy.

Does not the fact that, last year, the Secretary of State announced a £2 million survey of housing conditions in Wales and, this year, a £25 million cut in housing provision, demonstrate how profligate his judgment is and how devoid he is of any long-term strategy for the improvement of economic and social conditions in Wales?

Does the Secretary of State realise that this budget does not reflect the priorities of the people of Wales? The role of Government should be to provide prospects for future economic development, to improve the quality of public services and to serve the needs of the community, not the vested interests of a privileged few. This budget does not provide a basis for that. His Government have failed to recognise that the new Government who will be elected shortly will face a challenging time dealing with the legacy of his wasteful, selfish and short-sighted administration.

Mr. Hague

I and the hon. Member for Caerphilly (Mr. Davies) can agree on one point: the carrying by the Western Mail of one element of my statement in its edition yesterday was regrettable. That leak is being investigated. I will be happy to let him know what comes of that investigation.

After that, virtually everything in the hon. Gentleman's question was mistaken or wrong in one way or another. He referred to what he believes to be an increase in the costs of non-departmental public bodies. No one else in Wales recognises his figures. The running costs of those bodies have been flat in cash terms for the past two years, and will be reduced, as I have explained, in the coming year.

The hon. Gentleman had the nerve to criticise the Government's economic record, even referring to inflation and growth. No Labour Government in history have achieved the combination of low inflation, steady growth, falling unemployment and booming exports that exists in this country and that has brought unemployment in Wales down to below 100,000. He had the amazing nerve to criticise my statement as not representing opportunities for the many, yet the statement increases the number of modern apprenticeships and of adult technicians, raises capital spending for schools to the highest level ever, and raises economic development budgets by 14 per cent. in total.

The hon. Gentleman described the WDA as having a difficult year, but it has had the most successful year it has ever enjoyed, as almost everyone else in Wales is aware. I have also announced further increases in its budget in my statement.

The hon. Gentleman calculated that council tax increases would average as much as 12 or 13 per cent. However, based on the capping principles which I have just announced, it is not possible that average increases could be anywhere near that amount. As I explained in my statement, the maximum—the maximum of maximums—would be 15 per cent. Most authorities would be capped at a much lower figure, and many would be capped on anything more than a very small increase.

The hon. Gentleman criticised our record on education. This year, however, there has been an improvement in examination results, and, next year—based on the spending figures I have announced today—there will be more students in higher and further education in Wales than ever before.

The hon. Gentleman criticised my statement for not setting out a plan for the long-term future—but my statement was precisely that. It is a plan that provides for investment in education, investment in the creation of jobs and investment in our health service. He criticised the health service figures, yet he will not match the commitment that I have given to increase health spending by more than the inflation rate in every year of the next Parliament. He and those on the Opposition Front Bench have still refused to match that commitment, which makes their criticism of health spending sound very hollow.

The hon. Gentleman said that the statement does not reflect the priorities of the people of Wales. I think that the creation of jobs, support for education, encouragement of modern apprenticeship schemes and a strong health service are exactly the priorities of the people of Wales, and today I am implementing those priorities.

The hon. Gentleman, throughout his question, criticised reductions while welcoming increases. If not for the reductions that I have announced, we would not be able to have the announced increases. The alternative would be to have higher total spending. Therefore, in future—as he is trying to be all things to all people—he will have to answer the question of which increases he does not want. Does he not want increased spending on health or—it was an implication throughout his question—increased spending on the economic development agencies?

My statement reflects the priorities of the people of Wales, and I am confident that that is how it will be received.

Sir Wyn Roberts (Conwy)

May I assure my right hon. Friend that the people of Wales will welcome his statement, and particularly its main thrust—to support prosperity, and to promote personal prosperity? May I also assure him that other aspects of his statement will be particularly welcomed, such as the cancer centre which will be developed in north Wales, the apprenticeship schemes, his additional spending on schools and the road developments from Dolwyddelan to Pont Afanc, in my constituency, and the A55, across Anglesey?

Is it not clear from the comments of the hon. Member for Caerphilly that the Opposition have no idea what their plans might be? Is it not they who are dissembling—because they would be spending on assembling the assembly, with all the costs that that bureaucracy would involve?

Mr. Hague

I am grateful to my right hon. Friend, and I agree with his remarks. The statement is about building on the success that we have achieved in recent years—in encouraging new jobs and investment, and in bringing new prosperity to Wales—and sets out the resources that will enable us to continue doing so in the future. I welcome his welcome for projects such as the north Wales cancer treatment centre and road projects in north Wales. Few people have done more than he has to ensure that the infrastructure of north Wales—including the development of the A55, with which, through private finance, we will now continue—is improved and ready to cope with the future.

My right hon. Friend is quite right on those matters. He is also correct in saying that, whereas I have stated clear priorities and made clear decisions to increase some budgets, even if that means reducing others, those on the Opposition Front Bench have demonstrated no such sense of priorities, or an ability to choose between one proposal and another.

Sir Raymond Powell (Ogmore)

There is something wrong with the procedures of the House of Commons when the Secretary of State can say that the papers that he will speak about can be obtained from the Vote Office and, before any Back Bencher can get a copy or know what he is going to say, he delivers his speech. I went to get the papers—it took me a while—and by the time I got back into the Chamber, the Secretary of State had been speaking for some five to 10 minutes. How can we represent the interests of our people and our constituencies in documents that cover the whole 12 months of expenditure in Wales with such a short time to consider them? How can we question the Secretary of State, on behalf of the local authorities we represent, on all the subjects that he covered?

Some months ago, I asked a question at Welsh question time about the £7 million shortfall in funding for the Bridgend and Ogmore constituencies in the Bridgend county council borough. I received an offhand reply with no explanation and I now want to know whether the county council—represented by both my hon. Friend the Member for Bridgend (Mr. Griffiths) and myself—will be refunded for the £7 million shortfall for last year, in addition to any increase that is due this year, so that we can consider reopening the school that we closed in Ogmore-by-Sea and the swimming pool that we closed in the Ogmore valley, and so that the schools with 39 pupils in their classes—

Madam Speaker

Order. I not only have to safeguard this Welsh statement and see that all hon. Members concerned are able to put questions, but I have the other business of the House to safeguard, too. I am asking for questions, because I have heard a lot of comments since the Secretary of State sat down, and I must have brisk and direct questions that the Secretary of State can answer. Will the hon. Gentleman put a direct question, and give the Secretary of State an opportunity to answer directly and briskly?

Sir Raymond Powell

I shall be direct, and ask quick questions.

Why has the Secretary of State suggested reducing funding for training? Training is essential in our local authorities and, despite what my hon. Friend the Member for Neath (Mr. Hain) said, I can confirm that a lot of jiggery-pokery goes on with the figures. That is one question. The new local authorities have been in operation for eight months since the Government introduced them. Has the Secretary of State had any complaints whatever from any new unitary local authority in Wales about funding?

Madam Speaker

rose—

Sir Raymond Powell

I will not go on any further.

Madam Speaker

Even my Christmas spirit of good will is being stretched by all those questions.

Mr. Hague

The hon. Member is worried about the chance to debate local authority matters, but we will, of course, have to have a debate on local authority finance to discuss my proposals. We usually have that debate some time in the new year—last year, it was passed by a majority of 72—and the hon. Gentleman will be able to speak at greater length in that debate. The money will be distributed among local authorities by the standard spending assessment formula, which is agreed with the Welsh Local Government Association, and I am always happy to discuss changes in the formula.

The hon. Gentleman asked about money for training. I am redistributing the budget for training, and there will be a reduction in the training for work programme, but there will be an increase in spending on modern apprenticeships and adult technicians, because I think that they are more important and give better value for money.

Mr. Walter Sweeney (Vale of Glamorgan)

I welcome my right hon. Friend's emphasis on the importance of modern apprenticeships, which have attracted many welcome jobs to Wales, and particularly to Vale of Glamorgan. I wish to question my right hon. Friend on the roads programme that he has announced. As he knows, I am keen that there should be a new link road with the Cardiff international airport. He mentioned a number of road projects, but I did not hear him mention that project, and I wonder whether he could enlighten me.

Mr. Hague

I am grateful to my hon. Friend, who is quite right to emphasise the importance of modem apprenticeships. Inward investors, who have been flocking to Wales, want to know that we have the right standards and procedures for training, and increasing the number of modern apprenticeships is part of that.

I have provided money in this year's Budget settlement for preparatory work on a possible new link road to the airport. There is money in this year's provision for that preparatory work to continue, but the plans have been changing, and it is for the local authority to propose a specific road plan for a link to the airport.

Mr. Ted Rowlands (Merthyr Tydfil and Rhymney)

Was it not the Secretary of State's party that coined the rather horrible phrase "a double whammy"? Are not most of our communities going to suffer "a double whammy"—first, an increase in council taxes that is way above wage increases in our communities and will more than wipe out any so-called tax cuts, and secondly, cuts in school budgets? If the latter cut is made, would the right hon. Gentleman be willing to review the figures?

Mr. Hague

The level of council tax will be set by local authorities. In this settlement, I am providing 88 per cent. of total standard spending for Welsh local government. If I had provided a higher proportion—the figure is already dramatically higher than the 79 per cent. provided in England—I would not have been able to accommodate many of the other measures that I have set out in my statement. The settlement strikes the right balance of priorities, and will result in more capital spending on schools. Of course, it means that local authorities must continue to make every possible effort to be efficient and to use resources wisely. There is still more scope for many of them to do that.

Mr. Donald Anderson (Swansea, East)

The Secretary of State said that he did not want disproportionate investment in south-east Wales, and that he had instructed the development agencies to prepare key investment sites. Does he recognise that that may be a change from the failures of the past—a sort of deathbed repentance' Does he further agree that, to offset the imbalance, one needs an across-the-board strategy to recognise what has gone wrong in the past—for example, the savage cuts in agency funding—and the failure to build against the natural locational advantages of south-east Wales? Will he look at a strategy across the board in favour of other parts of Wales?

Mr. Hague

The hon. Gentleman cannot talk about failures in the past. Bringing Lucky Goldstar to south-east Wales—the biggest inward investment in the history of Europe—was not a failure of past policy, but a tremendous success for Wales. It also provides a tremendous opportunity for the whole of Wales, since at least as many jobs again can be provided all over Wales in supplying such an operation. We must not lose sight of that.

It is certainly true that, in the light of the huge success that we have enjoyed with that project and others near it, a greater effort is needed to make sure that future inward investments—wherever possible—go to other areas of Wales, or are helped to go further west or further north. Sometimes, the agency should be prepared to pay more for projects that go further west or north, and less for projects that go to areas that have done well in recent years. I agree that we need a strategy for the future, but it is not right to talk about failure in the past.

Mr. Alan Williams (Swansea, West)

Does the Secretary of State agree that the figures that he has announced today and those in the Red Book indicate that, in real terms, we will have a cut of £590 million in Government funding for Wales in the next three years? Since it is implicit in what he says that none of those cuts will be in health services, does it not automatically follow that £590 million of cuts will have to be met in other services? Since education is the major cost for local authorities, how on earth does he think that efficiency gains will enable local authorities to absorb cuts of that scale?

Mr. Hague

I have been straightforward in setting out how increases in some areas will require reductions in others. Reductions will be needed in the coming year in the roads programme and in total local authority capital spending—although not in schools—to accommodate increases elsewhere. The right hon. Gentleman is right to think that we have to make a trade-off. Unfortunately, it is a recognition that is not shared by his colleagues on the Labour Front Bench.

In the longer term, the Government are committed to reducing the proportion of gross domestic product spent by the state. That means that we have to get more out of public expenditure and the majority of Departments have published in the survey plans that will imply reductions in real terms over a long period. We have added to the plans of the Welsh Office in this survey, and plans for future years will be revisited in future years.

Mr. Ieuan Wyn Jones (Ynys Môn)

Given that the Secretary of State has announced capping of 1.8 per cent. on local government spending over last year, that we face inflation of 2.7 per cent. and that local authorities need to take into account pay increases for teachers, increases in fire authority budgets and increases as a result of their new statutory responsibilities under the landfill tax, does the right hon. Gentleman recognise that the proposed settlements for local authorities will inevitably mean cuts in many of their services?

Given that the education budget accounts for almost half of local authority spending, does he not recognise that those cuts will put 1,000 teacher's jobs at risk in Wales and make class sizes much larger? Does he not recognise that social services will also be badly hit? How can he say that this is a good settlement for local authorities in Wales?

Mr. Hague

The hon. Gentleman should not be misled by the 1.8 per cent. The way in which capping works is complicated, but I said a 1.8 per cent. increase or the increase in the standard spending assessment, whichever is the greater. In many cases, that will be greater than that 1.8 per cent. figure.

The key figures are that the support that central Government are giving to local government will increase in this settlement by 2.6 per cent., which is a £64 million increase. That is about the current rate of inflation, and more than the forecast rate for the coming year. Local authorities have to learn to live within settlements that are around about the rate of inflation. The laws of economics are not suspended for local authorities, and they should be able to deliver their services without reducing them with settlements that provide them with an increase in line with the rate of inflation.

Mr. Nick Ainger (Pembroke)

Does the Secretary of State accept that the figures that he has announced for the health service—a 4 per cent. increase on the plans for this year compared with next year—represent a real-terms cut because of the substantial non-recurrent expenditure that has taken place this year? In fact, the figure is far below 4 per cent. and he is not honouring his claim that there would be year-on-year increases in the health service.

Can the right hon. Gentleman also confirm that council tax payers will be faced with substantial rises while at the same time there will be substantial cuts, particularly in the education provided in our schools and in the social services provided to those in our community who need them? There may well be threats throughout Wales to residential homes provided by local councils. Can he also tell us why, despite the delegations from south-west Wales that have seen him about the need to improve communications to that area, he has made no announcement about improvements to the roads leading from the A40 to Pembroke Dock and Fishguard?

Mr. Hague

There were several questions there. On health spending, we have to compare like with like. I am comparing the plans at this point with the plans last year. Of course, there are often changes in year, but there will no doubt be changes in year in future years as well. I am adding £94 million compared to last year's spending plans.

Local authorities are receiving in total an extra £64 million. If Opposition Members think that the increase in the money we give to local authorities should be more than £64 million in the coming year, they need to come to the debate that we will hold next January or February on the local government settlement and say what the amount ought to be. They have to bear in it mind that that means either a higher level of spending or reductions in other programmes, neither of which they seem prepared to admit to advocating. That is what they have to face up to.

I have explained that I think that the other areas to which I have chosen to direct increased resources in the coming year are higher priorities than the roads programme. I am certain that the health service, the promotion of jobs and modern apprenticeships, and capital spending on schools are higher priorities; other people may disagree, but I am convinced that that is the right judgment.

Mr. Paul Flynn (Newport, West)

The governor-general has claimed that he is fulfilling the political priorities of the people of Wales. How is he doing that by taking even more money from our least-favoured schools with the most problems and giving it to our most-favoured schools with the fewest problems, by trying to impose grant-maintained status, which was rejected by my constituents by an 87 per cent. majority in a recent poll, and by trying to impose on Wales an unwanted nursery vouchers system, when the Government's survey of popular opinion in Wales found that 5,000 people were against it and only one person in favour? Are not the Secretary of State's educational priorities alien, irrelevant and damaging to Wales?

Mr. Hague

The hon. Gentleman has not understood that choice and diversity in education improve educational opportunity for everyone. That is demonstrated by the improved performance of our schools over the past year. He has not noticed that nursery vouchers are bringing additional resources of between £4 million and £5 million into nursery education in Wales.

The hon. Gentleman asks how I know what the priorities of people in Wales are. I have noticed that the one thing that nobody in Wales ever stops me in the street and asks me to spend more money on is setting up an assembly full of politicians wasting their time in Cardiff.

Mr. Alan W. Williams (Carmarthen)

I welcome the Secretary of State's comments on the Carmarthen eastern bypass, and I am pleased that it is going ahead and will not involve the private finance initiative. More generally, however, he dressed up the statement as representing growth here and increases there, but that belies numerous cuts in highways, housing and other areas. Is not the summary of his statement given in the first paragraph, which says that the budget of £6.9 billion is £100 million more than this year's? That is an increase of only 1.4 per cent., at a time when inflation is at 2.7 per cent. Is that not in truth a cut of 1 per cent. in what the Welsh Office is doing for the economy of Wales?

Mr. Hague

I thank the hon. Gentleman for his welcome for my remarks about the Carmarthen eastern bypass. He said that the statement was dressed up as increases and growth everywhere, but that is not the case. I explained that I deliberately made increases in some areas, and I said clearly that there will have to be reductions in others. There is no dressing up; there is a clear choice of priorities. We want to increase some things, and to do it we have to reduce others. What has been absent from the debate is any sense among Opposition Members of choosing priorities, because they want to be all things to all people: they want to criticise every reduction and still have every increase.

Dr. Kim Howells (Pontypridd)

Is the Secretary of State aware that Rhondda Cynon Taff contains some of the hardest hit and poorest communities in Wales? What does he intend to do to scotch the rumours that we will lose hundreds of teaching jobs because the local authority simply will not be able to afford to employ teachers in the future? Those are not bare statistics, but extremely difficult choices that will have to be made. We have heard nothing this afternoon that will give anyone any hope that those awful redundancies will not become a reality.

Mr. Hague

Such stories are given currency by local authorities to reinforce their negotiating position and are then quoted by hon. Members in the House. Today, I have set out a £64 million increase in the amount that the Government will give to local authorities next year. It will be distributed among them according to the formula that is agreed with them. If Opposition Members think that the increase should be greater, they will have to say where they would obtain the money.

Mr. Peter Hain (Neath)

Does the Secretary of State have any additional damping provision above that previously announced for Neath and Port Talbot? Depending on his answer, I am either extremely angry or absolutely livid. Last year, we had cuts of £10 million, and lost 35 teachers. This year, I estimate additional cuts of £7 million and that 25 teachers will be sacked. Last year, we had a 25 per cent. increase in council tax, an average of £125. This year, I estimate that it will be 15 per cent., nearly £90.

That will mean that council tax will have risen by more than 40 per cent. in two years. How can the Secretary of State possibly think that local people can pay that sort of money? He is strangling local communities in Wales. He should apologise and be ashamed of himself.

Mr. Hague

As I have explained, the Government provide, one way or another, 88 per cent. of the money spent by local authorities in Wales. That proportion is dramatically higher than in England. Last year, I introduced two damping schemes to protect people faced by very large council tax rises; this year I do not contemplate any additional damping on top.

Mr. Hain

Now I am livid.

Mr. Hague

I am distressed that the hon. Gentleman is now livid, but he will understand that the £18 million damping scheme that I announced in my statement will mean that the maximum council tax increase for any authority in Wales will be 15 per cent. However, the maximum increase that most authorities can impose will be dramatically less than that. We are dealing with a situation quite different from last year. The large differential between English and Welsh council taxes will at the least be maintained.