2. What discussions has the Counsel General had regarding the legal implications for Wales of the proposed establishment of a shared prosperity fund by the UK Government? OAQ(5)0040(CG)

Well, officials are considering the matter and the External Affairs and Additional Legislation Committee have been preparing a report on this topic. We intend to update Members on this work over the coming months.

I thank the Counsel General for that response and it seems there’s work in progress going on in his department looking at this. But does he give any cognisance to the concerns that have been raised by commentators that suggest that whilst on the surface who could argue with the concept of a shared prosperity fund—it sounds immensely warm and cuddly and fair and just and everybody will have a stake in it—the dilemma here is, of course, that if this is made in Westminster, decided by Westminster, allocated by Westminster, or, alternatively, allocated according to political priorities, it could be very unfair indeed and may indeed, legally, reverse the current situation of funding to the devolved institutions. It could make it very unfair indeed. So, does he share those concerns that this approach could fundamentally change the nature of devolution and actually re-establish Westminster control over devolved funding?

You make a number of very valid points. First of all, taking the concept of a shared prosperity fund, it’s unclear, when the Government talks about a shared prosperity fund, what prosperity it’s talking about, whose prosperity it is and how exactly it is going to be shared and who’s going to control that sharing. Of course, there’ve been a number of statements, and the problem with the statements that have come out is they’ve been rather contradictory, in my view, in terms of the nuances: on the one hand, that the process of leaving the EU and the great repeal Bill will result in more powers coming to this place and increased responsibility; but then, on the other hand, there is talk about increasing the unity of the United Kingdom of concepts such as no more ‘devolve and forget’. It’s very unclear exactly what that term means and it could mean that you have a situation where there are increasing areas of responsibility and increasing powers but, of course, in order to exit those responsibilities you’ll need to apply then to the shared prosperity fund, which will then determine the way in which moneys can actually be used and, effectively, be a significant drawing back of the fundamental principles on what devolution has proceeded with ever since 1997 and I think the outcome of the various referendums and commitments that have been given.

So, there is a concern there and it is a matter that will need considerable clarity. I’m not quite sure how or when that clarity may emerge, bearing in mind the current situation. But I think the position of the Welsh Government is this: those areas that are the responsibility of this place, the funding that was promised should come here, and it should come here without strings attached because that is the true nature of decentralisation and devolution.

EU state aid rules are currently a reserved matter. But domestic, or UK, state aid—which is defined as any other grant or form of subsidy that doesn’t involve a distortion to trade across EU borders—is devolved. So, in removing the EU state aid framework, what’s the position of the Welsh Government? Should domestic UK state aid remain a devolved matter?

Well, once we have left the EU, we are in a position where there will be no state aid issues, particularly as regards the internal market within the whole of the United Kingdom. So, the question that will arise—. Well, two things will happen, I think. First of all is what might there be in respect of transitional arrangements in terms of leaving the European Union, and state aid, I would expect, to actually feature as a significant part of that.

But one of the key issues that we will be concerned with will, obviously, be the issue of inter-UK trade, and what the arrangements are there. And we’ve seen already issues in terms of how aid and regional support, potential distortions of the market, have been dealt with, with regard to things like air passenger duty, whereby it’s very clear the long-standing policy that that, for example, should be devolved to Wales, and we should have the opportunity to develop air transport in the way in which it fits in within our economic model, where there is an imposed, effectively, state aid obstruction, on the grounds it would distort the internal market. It seems to me that one of the most important issues that is going to arise, in terms of post-EU discussions, is actually what the relationship is going to be between the devolved nations in terms of internal trade. So, I think you’re right to highlight it. How it will work out is very difficult to say. But, clearly, there needs to be a model that is sufficiently flexible to enable the devolved nations to pursue their economic objectives and responsibilities in a much more flexible way than probably exists at the moment.