The UK Government has announced that structural funds will be replaced by a UK shared prosperity fund. And even though a consultation on the fund is due to be launched before the end of the year, very little detail has been given on how this fund will operate. The sources of funding coming to Wales will change in the wake of Brexit, but, of course, little change has been seen in the reality behind the needs-based assessment that determined those funds. According to a wide range of evidence and economic data sets, there is a clear rationale for continued investment in Wales, including GVA per head in the poorest parts of Wales, which is half the UK average. These needs, of course, will not have gone away, whichever approach the funding takes, so in our report we highlight how the fund might be shared between the four nations, and we present a strong case for Wales to receive at least the same funding post Brexit. But equally important, of course, is for the moneys to continue to be managed and administered here in Wales.

Over the past 20 years, the Wales European Funding Office, WEFO, have managed, administered and spent EU funds directly, and in the process they have built up considerable expertise and established partnerships, and they have the necessary structures in place to deliver successful programmes. The UK Government has committed that all decisions made in Wales will remain in Wales, and we expect this commitment to be honoured. We recommended that the Welsh Government should install a central unit equipped with the necessary expertise to deliver a coherent programme of funding post Brexit, and I’m pleased to say that the Government has confirmed this intention, as well as its moves to co-ordinate this work across Government.

The committee believes that the Welsh share of the UK shared prosperity fund should provide multi-year funding, ensure partnership working and also, of course, to continue to mainstream equality in Wales. Also, the Welsh Government should continue to focus on promoting equality, tackling poverty and on human rights when administering the fund. In addition, the committee believes that the move to the new fund should be taken as an opportunity to simplify administrative arrangements and to use approaches such as those proposed by the Cabinet Secretary for trusted partner organisations.

The other main tranche of EU funding comes from the common agricultural policy. The CAP is vital to farming in Wales. In 2016-17, over half the farms in Wales either made a loss or they required a subsidy to avoid making a loss. Now, there are clear opportunities to improve on the CAP for Wales and to ensure that post-CAP funding is better aligned with the specific needs of Wales. But it is essential that these funding decisions respect the devolution settlement and that they give the Welsh Government the maximum possible flexibility to enable it to make decisions that support the specific needs of the Welsh land management sector through made-in-Wales policies. To this end, I am pleased that the response from the Government confirms that agreements with the UK Government mean that Wales, and I quote,

'will not be constrained in its design of new schemes and will be able to implement what is best for Wales.'

At present, the funding that comes to Wales under the CAP is double its UK population share, and this reflects the importance of the agriculture sector to Wales. It’s essential, therefore, that this level of funding is protected post Brexit and guaranteed for a number of years.

We welcome the fact that the UK Government is launching an independent review into post-CAP funding levels across the UK, but we remain wary of possible outcomes of that that may provide a sting in the tail for Wales. But, certainly, we’ll be continuing to keep an eagle eye on that process. We urge the Welsh Government to be a strong voice during this process to ensure that any mechanism the review recommends is consistent with the recommendations of this committee and, of course, that it meets the needs of Wales. 

Wales has also benefited greatly from other EU programmes such as Horizon 2020, especially in the higher and further education sectors, as well as the European Investment Bank. We recommended that the Welsh Government urges the UK Government to maintain a relationship with the EIB to ensure that Wales remains able to benefit from continued investment and infrastructure projects, and I’m reassured that the Welsh Government continues to press the UK Government on this, but the lack of progress and clarity provided by the UK Government remains a concern.

We also support the decision to seek continued access to Horizon Europe, but we believe that should such access not be possible, the equivalent funding should be provided to the UK science and research budget.

In addition to the initial post-Brexit funding level, it’s also important to consider how such funding will evolve over time. In this, we share the concerns of the External Affairs and Additional Legislation Committee that a one-off adjustment to the block grant, while acceptable in the short term, may pose risks in the long term. We agree with the recommendation that 

'the Welsh Government ensures that funding is' futureproofed

'and examines the merits of an objective needs-based formula' that is agreed by all nations of the UK.

The committee heard evidence that simply uplifting the baseline of the block grant by an equivalent amount to EU funding would have a severe impact on Wales over time. It should be a priority for the Welsh Government to ensure a sustainable, long-term solution that allocates funding across the UK based on needs as a replacement for the Barnett formula and its in-built squeeze. I’m pleased that the Government agrees with this.

It’s clear, therefore, that a great many of the important decisions relating to post-Brexit funding for Wales are decisions for the UK Government. But as I said at the outset, the committee is disappointed by the lack of engagement received to date from the UK Government. However, we do recognise the role the Welsh Government will play in negotiations between the Governments.

I hope that the evidence that the Finance Committee has received and the report that we have produced will form a strong, cross-party Welsh case for fair post-Brexit funding, as well as adding weight to the Welsh Government’s position. I’m pleased that the Welsh Government has accepted in full the recommendations of the committee’s report. That said, I find the Cabinet Secretary’s comments in the Chamber, namely, that he does not for a moment believe that we have received sufficient assurances that the UK Government will respect the devolution settlement, to be deeply worrying, and they highlight the need for the Governments to work hard to ensure a fair, reasonable and long-lasting deal for Wales and its people. Thank you.