Item 5 is a debate on the Finance Committee report, 'Post-EU funding arrangements', and I call on the Chair of the committee to move the motion—Peredur Owen Griffiths.

Motion NDM8149 Peredur Owen Griffiths

To propose that the Senedd:

Notes the report of the Finance Committee: Post-EU funding arrangements which was laid in the Table Office on 10 October 2022.

Motion moved.

Thank you very much, Llywydd, and I am delighted to move the motion and to open this debate on the Finance Committee’s report on post-EU funding arrangements. The issue of EU replacement funding has a particular salience in Wales, given that it was the largest recipient of EU funding relative to its population of the UK nations. As a committee, we considered this as a priority, and our inquiry took a deep-dive into replacement EU funding, with the aim of clarifying the level of funding received here in Wales.

As part of this, we considered the UK Government’s funding schemes, namely the community renewal fund, the levelling-up fund and the shared prosperity fund. Given the cross-cutting nature of our inquiry, we were pleased to hear from the Welsh and UK Governments, and I would like to place on record my thanks to the Ministers who appeared before the committee.

The new funding arrangements established since the UK left the EU represent a seismic shift in the way that money is allocated to Wales and the role of the Welsh and UK Governments in that process. Our overriding finding was that the successful implementation of these new funds in Wales is endangered by the lack of engagement between the Welsh and UK Governments. The delivery of funding under these arrangements should not just be about sharing money across the UK; it also needs to be about the sharing of ideas and responsibilities if it is to be a truly partnership approach.

We made 20 recommendations in our report, which includes recommendations aimed at the Welsh Government and the UK Government. I am thankful to the Secretary of State for Wales and the Secretary of State for Levelling Up, Housing and Communities for providing a written response to our recommendations. We appreciate the UK Government is not accountable to the Senedd. However, the successful delivery of EU replacement funding will require co-operation from both Governments, and therefore we are grateful the UK Government has been part of the scrutiny process. I would also like to thank the Minister for Finance and Local Government and the Minister for Economy for their joint response to our report and for accepting all the recommendations that apply to the Welsh Government.

Given the time today, I will cover our main concerns and findings. I'll start with the level of funding for Wales. When we embarked on this inquiry, a key consideration for us was how the new funding proposed for Wales compared to the funding received while the UK was a member of the EU. The Welsh Government states there is a £1.1 billion loss of replacement EU funding in Wales. The UK Government told us the shared prosperity fund will ramp up as remaining EU funds tail off. It says providing both wasn’t something that was ever promised. Substantiating these competing claims has not been possible, because it was clear the Welsh and UK Governments were not considering how the new funding proposed for Wales compares to the funding received while in the EU in the same way. Therefore, we were unable to take a view on whether Wales is due to receive more, less or the same level.

The UK Government's autumn statement adds to uncertainties regarding the future of these funds and their value. Whilst we understand it is necessary to explore the different perspectives around replacement funding during our inquiry, we spent so much time unpicking the basic principles of each Government’s argument in relation to the level of EU funding. We received evidence suggesting that funding announced to date by the UK Government is short of what Wales would have received if we had remained in the EU, albeit any future EU funding is an estimate, and therefore there is a level of uncertainty about that value.

Over the course of the inquiry, we have seen more detailed information published by both Governments, but it is unhelpful for Governments to disagree as they have, and to not promptly and fully publish the detail of their perspective. It is disappointing that the level of disagreement between the two Governments continues. The Welsh Government claims the UK autumn statement means the overall value of the SPF for the UK has been reduced by £400 million to £2.2 billion by the end of 2024-25. However, only yesterday, we received correspondence from the UK Minister for levelling up stating that this is incorrect. This is exactly the type of dispute that we believe needs to be avoided if these funds are to succeed. My predecessor has previously written to the two Governments, highlighting the importance of transparency in funding calculations. It makes our job of effective scrutiny even harder when there are disagreements like this over levels of funding.

Will you take an intervention? Can I say what you've heard me say a number of times? It would help if both the Welsh Government and the Westminster Government showed their workings rather than just giving us a number at the end.

Thank you, Mike. We recommend that an independent body should assess both the Welsh and UK Governments' claims around the levels of future funding and how this compares to previous EU funding. We are pleased that the Welsh Government has agreed to this recommendation, but, unfortunately, we did not receive the same commitment from the UK Government. We therefore urge the Minister to pursue the issue at the Finance: Interministerial Standing Committee when it next meets.

Let's move on to the UK Government acting in devolved areas. A major concern for us is the UK Government using these funds as vehicles to act in devolved areas, namely through the financial assistance powers in the United Kingdom Internal Market Act 2021 and the Multiply programme. We also have sympathy with the Welsh Government that it is being bypassed in the decision-making process. The Finance Committee of the fifth Senedd has previously explored issues relating to the UK Government funding devolved areas via the internal market Act, so I will not reiterate those arguments today. However, the Multiply programme is further encroachment on an area that, as the Minister for Economy said, is 'plainly devolved'. We are disappointed with the method of allocating funds through the Multiply programme, and, given that education is devolved, we recommended that the UK Government provides flexibility to spend funds from the programme in other areas. We also acknowledge the Welsh Government’s position that the programme is too narrow in focus and led to the duplication of provision. The UK Government says that

'Multiply is intended to complement existing Welsh Government provision' and that

'There remains the flexibility for places to adapt the delivery of Multiply in response to their local needs.'

However, we feel that this should have gone further, to allow the Welsh Government greater flexibility to spend this funding in other areas. Worryingly, we also believe this Senedd is in danger of being sidelined, and that further consideration is required, to ensure that effective parliamentary scrutiny of these and future replacement funds takes place in Wales.

Whilst the committee appreciates the attendance of the then Secretary of State and the then Under-Secretary of State for Wales, the UK Minister with responsibility for the funds refused to attend. As a committee, we have also faced similar issues in the past trying to engage with HM Treasury and their refusal to attend committee to discuss fiscal matters that have the potential to significantly impact Wales. If the UK Government insists on acting in devolved areas, scrutiny should not be done at Westminster only. These are new, significant funding arrangements that require resilient, transparent and accountable structures that reflect the constitutional realities of the UK, and this Senedd needs to consider its role in scrutinising these funds.

I’ll move on to the three specific funds that I mentioned at the start—the community renewal, levelling-up, and shared prosperity funds. We are very concerned with the lack of engagement on all three funds between the two Governments. These are new and crucial funding streams for Wales, and a lack of dialogue risks misaligning objectives between local government and the Welsh and UK Governments. In order to ensure value for money of project delivery, we believe we work best for the people of Wales when all tiers of government work together. In relation to the community renewal and levelling-up funds, we heard from local government that the timescales for submitting bids had been challenging, and the administrative pressures may have been a deciding factor in the types of bids that were submitted. The UK Government has acknowledged this position. Furthermore, the process was described as inherently wasteful. We are therefore pleased that the shared prosperity fund has moved away from the competitive process of those funds, and we have made a number of recommendations in this area.

The Welsh Government has spoken positively about joint work with the UK Government on the free-ports programme in Wales. Equally, the UK Government said it is eager to strengthen its working relationship with the Welsh Government by building on its effective collaboration on the programme. In addition, the UK Government says it remains open to conversations with the Welsh Government on their role in any UK-wide ministerial forum, and, more broadly, on the opportunities for them to engage with SPF and other levelling-up funding opportunities. We hope the Welsh Government takes up this offer to engage, and hope the approach taken on free ports can be replicated in the delivery of SPF and future funds, in order to maximise the investment in Wales.

Finally, I’d like to look ahead at plans for future funding. The EU funding programmes were delivered over a 10-year period, with the flexibility and longer spend profiles being described as hugely important. The shared prosperity fund only has a three-year funding cycle and has restrictions on moving funds between projects and financial years. Furthermore, returning underspends from the SPF could lead to projects being proposed in order to ensure money is spent, rather than ensuring priorities are dealt with. For these reasons, we recommend the UK Government increases flexibility to move the SPF funding between financial years and between projects, as well as increasing flexibility on how underspends will be treated. We note the UK Government’s response that, and I quote:

'The UKSPF is providing local leaders with the opportunity to spend funding as they see fit and to enable places across Wales to unleash their unique potential.'

However, this response reiterates our view that the Welsh Government is being bypassed in the decision-making process. We also sought clarity on the UK Government’s long-term plans for replacement EU funding and the status of the shared prosperity fund beyond 2025. The UK Government has said that any continuation of existing or successor funds will be informed by a combination of engagement with relevant partners and evaluation of evidence, and that it would be inappropriate to pre-empt the structure and focus of future funds at this point in time. In this current economic climate, this offers little reassurance, and the committee believes that more needs to be done until we see funding arrangements that meet Wales’s needs. Diolch yn fawr.

Can I welcome the opportunity to take part in the debate today as a member of the Finance Committee, and can I thank the Chairman for capturing so eloquently the position we found? Of course, leaving the EU was always going to present challenges, particularly when such funding had become entrenched within communities over a period of time, but I also believe that it presented us with an opportunity to design new funding schemes so that we could support people, businesses and communities as effectively and as efficiently as possible. 

There are some differences with the new funds that were broadly welcomed by most stakeholders. For example, in evidence, the WLGA welcomed the decision of the UK Government to allocate these funds directly to councils as the democratically elected bodies closest to the people they serve, but I understand that Welsh Ministers have not been as positive about this, feeling like they have been somewhat sidelined. The committee report rightly recommends that the UK Government provides further information on how the UK-wide ministerial forums will support the design and delivery of the funds.

From a personal viewpoint, and I reiterate personal, there is scope to support a more localised administration of this replacement funding. As a former local authority leader, I am a firm believer and advocate for the principles of subsidiarity. As we heard from stakeholders, and as I know myself, councils are often best placed to manage funding initiatives. They already work within local and regional structures, are familiar with partners and stakeholders, and understand what it is in their area that is needed.

This takes me on to a more fundamental point. As the Chairman has said, the committee heard in evidence that a lack of engagement and collaboration between UK and Welsh Government is holding back the potential of new post-EU funding schemes to deliver what they are intended to achieve. This is also preventing us from properly learning about what is currently going right and what needs to change to ensure that the funding streams work together in a coherent way.

There were always going to be some teething problems when setting up funds, and these have been explored by the Finance Committee, such as challenging timescales and whether the process is as streamlined as it could be. Hopefully, the UK Government listens to these and identifies ways of moulding the schemes so that they work more efficiently. But, I feel that both Governments have become drawn into an increasingly complex argument about the quantum of funding compared to previous EU funding, which has unnecessarily soured relationships and hindered progress.

As the report notes, the committee is of the view that both the Welsh and UK Government estimate the overall annual level of funding through ESF and ERDF at broadly the same level. The difference is how this relates to the tail-off of remaining EU funding and the reliance of the Welsh Government on projected EU funding, which brings with it a level of uncertainty as to exactly how much we would have received. 

As the Chairman has already referenced, we received a letter only yesterday from the Minister of levelling up regarding the Welsh Government's claim that the value of the SPF has been reduced by £400 million. The letter states that this statement is factually incorrect, and the Government confirmed that there has been no change to the total quantum of UK SPF funding. So, I hope that the Minister will address this in their response, because too often the discussion has been muddied by politics, and it shows why there needs to be more openness and clarity from both sides so we know exactly what is going on and how any issues will be rectified so that the Welsh and UK Governments can finally move on from this debate.

The Deputy Presiding Officer (David Rees) took the Chair.

Will you take an intervention?

Yes, certainly, Alun.

You spent finance questions emphasising the importance of the quantum of cash available to local government. I've got no argument with that. You now seem to be proposing an argument where the quantum of cash is less important than other matters. Who is the real Peter Fox?

All I'm saying is that there are two parties here who believe that the quantum is different, yet we haven't had the evidence to demonstrate one way or another. I'm reciprocating what the Chairman has said. The real Peter Fox is stood behind you, and he'll tell you as he sees it.

Instead, let's focus on what really matters the most, and what the committee report is actually about, and that is providing communities with the funding that they need, getting projects off the ground, and delivering a better future for our communities. Thank you, Dirprwy Lywydd.

Can I recommend Members read the full report? Because there are some very interesting things in there, not just the recommendations and the committee views and conclusions, which normally most of us read in reports of committees we're not on.

On 1 January 2021, the trade and co-operation agreement took effect and established the UK's future relationship with the EU. The UK's access to future rounds of European Union structural funding programmes was not agreed. That meant that we no longer got the money. The UK Government has developed their new funding schemes: the UK community renewal fund, the levelling-up fund, and the UK shared prosperity fund. The Welsh Government has said that there's a reduction in the money coming to Wales. The Westminster Government has said that there is not. Both statements were said confidently and forcefully, as if there could be no argument with them. Neither has shown their workings, although Simon Hart did promise to show the Westminster calculations, but he was not Secretary of State for long enough after the meeting to fulfil that promise. Our request to the Welsh Government is that when they make financial statements, to publish their calculations. Eventually, we discovered that some, or almost all, of the difference was that Westminster included continued European funding that was tailing off, and the Welsh Government did not. If the Welsh Government knew that, why didn't they tell us that in the first place? It would have made life a lot easier for the committee, and saved us a substantial amount of time.

The competitive processes around the UK's community renewal fund and levelling-up fund were also criticised by local authorities. Pembrokeshire County Council, which is certainly not a Labour area, referred to the competitive process around the community renewal fund as 'inherently wasteful'. The WLGA explained that when you add competition for the funding, all local authorities put in a lot of resources and spend a lot of time, and other organisations put in a lot of resources, and they had to put time and effort into bidding with no guarantee of success. Then, of course, all those applications had to be assessed. You're spending a lot of time, a lot of money, and with a lot of people ending up very upset at the end of it.

The shared prosperity fund was launched on 13 April and will cover 2022-23 to 2024-25. It's valued at £2.6 billion across the UK. The Finance Committee of the fifth Senedd expressed disappointment regarding the lack of available information on the shared prosperity fund in its report on preparation for replacing EU funding in Wales in 2018. This followed the Welsh Affairs Committee concluding in 2020 that up to that point in time there had been a failure to properly engage with stakeholders or Parliament.

Local allocations of the shared prosperity fund in Wales are distributed on a basis of population 40 per cent, community renewal fund index 30 per cent, Welsh index of multiple deprivation 30 per cent. In terms of how the distribution differs to EU funding, as has been noted, it is not possible to compare allocations at local authority level with previous EU funding due to most EU project allocations spanning more than one area. There is an apparent shift away from the west Wales and the Valleys region towards east Wales. I would put it much more simply: from the poorer parts of Wales to the more affluent parts of Wales. I welcome the shared prosperity fund moving away from the competitive funding process of the community renewal and levelling-up funds.

Can I come on to what I think is the most important thing? I believe universities are the key to improve the gross value added and income of Wales. If we look at successful cities, regions and nations, the role of universities is crucial to economic success. Successful areas also have highly educated and skilled people living there. Why are Palo Alto and Cambridge more successful than anywhere in Wales by two or three times? Why is Mannheim the same? They've got those things. These are incredibly important. If we're going to become wealthy, we need more universities, more money spent on universities, and more research being carried out. The UK's ongoing uncertain future relationship with Horizon Europe is adding to the pressure facing Welsh universities. Universities Wales have welcomed the recent confirmation from the Westminster Government that associating with Horizon Europe remains the ambition of the UK Government. I welcome that, in the interim, there was an announcement of a funding package to invest in the UK research and development sector. It will be beneficial if the UK remains closely associated with Horizon Europe in the future, if only to allow people with great skills to come into this country and to work with other people in Europe with those great skills in order to improve our wealth. 

The announced investment from the UK Government includes an uplift of £100 million in quality-related funding for English universities, and we get a Barnett consequential. Quality-related funding is essential in enabling our Welsh universities to compete and attract additional investment to Wales, bringing benefits to communities across the country. Providing this funding to Welsh universities will help mitigate the impact of the uncertainty over the future association with Horizon Europe and a loss of European structural and investment funds, but, fundamentally, if you want to be a wealthy nation, you have a highly skilled, highly educated workforce, and outstanding universities. 

I thank the committee Chair and members for their work in this important area. For me, the starting point is to remind ourselves of some of the pledges made by the UK Government as we left the European Union, and just to evaluate to what extent those pledges have been delivered six years down the line. We were told, as we've just heard, that we wouldn't be a penny worse off here in Wales. We were also told that we would benefit from removing the regulatory burden and the red tape, and that that would allow targeted investment and more efficient investment too. We were told that it would be a means to take back control, if you recall, and to empower devolution to make decisions. Now, I don't see that yet, I have to say, although we are six years down the line, as has been noted.

The funding allocated to Wales under the shared prosperity fund up to 2025 falls short of the levels that we would have received during the same period were we still part of the European Union. The implications of the autumn statement by the Westminster Government, of course, tell us that there will be £400 million less, although I do note what the Chair said on correspondence that countered that argument, but if you only look at the economy and the performance of the economy more broadly, particularly in comparison to the rest of the G7, then the suggestion that we are, somehow, better off being where we are today, to me, is just an empty promise. And we also know that the Welsh Government wasn't consulted with at any stage on the development and planning of how this budget would be used, although, of course, they do cut across devolved areas and, for me, that sends a message that the Westminster Government is treating this place with disdain.

And let's contrast what we have and what we have, is what I'm trying to say, because the shared prosperity fund is an unashamed political construct, hastily cobbled together to fill a vacuum left behind after Brexit, forcing, effectively, the recreation of a wheel that was already in place. The Welsh Government had a framework, co-developed over a number of years with the Organisation for Economic Co-operation and Development, with Welsh local authorities, with higher education, further education, the business sector and the third sector—all subject to public consultation as well. But no, we need to build something else.

We heard from Mike Hedges that bids have been resource intensive for local authorities, very much driven by time pressure rather than a more strategic take when it comes to influencing which projects are being put forward. No necessity of reference to other investment, particularly Welsh Government investment, so you end up with non-complementary projects, a risk of duplication, and certainly a risk of poor value for money as well. And Multiply, of course, is referenced in the work. Education and skills are devolved, but the Welsh Government was given no role in developing those proposals. There should be huge alarm bells ringing there about the Westminster Government meddling in devolved areas, and again, running the risk of serious duplication around some these.

We're now moving from EU funding cycles of 10 years, with two-year overlap as well, which gave stability and continuity, and allowed for a long-term strategic outlook, to a shared prosperity fund three-year funding cycle. We're at the end or very nearly at the end of the first year now, and local authorities are still waiting for confirmation on the SPF investment plans. It isn't conducive to the best use of resources.

The UK Government as well have created, as they confirm in their response to the report, a dedicated Wales-area team to now run the bureaucratic side of these post-EU funding streams, and that includes work around reporting, monitoring, assurance, evaluation. All very important—granted—but of course, all of these already exist in Wales and all of this is now replication, it's duplication, it's additional complication, and cost to the Welsh taxpayer. So, my conclusion is that it's very much, so far, so bad, and there's a long, long way to go to make sure that those promises that were made six years ago are anywhere near being delivered.

As a member, also, of the Finance Committee, I was very keen that the committee undertake this hugely important piece of work for Wales as a matter of priority, both for fairness and honesty and fair funding as principle, and for the fulfillment of political promise and trust and so that Wales is also not treated with disdain. This is because Wales was the largest recipient of EU funding relative to its population of the UK nations. It is vital that we hold the UK Government to its promise and to account, in that Wales is, in their own words, not a penny poorer off now that the United Kingdom has left the European Union. I note the Welsh Government's response to our report, where they state that not a penny of replacement EU funding has reached Wales. 

I am heartened that the Welsh Government has remained totally committed to further dialogue with the UK Government, which includes a discussion on the shared prosperity fund, funding levels and allocations, together with the establishment of a genuine co-decision making function for Ministers, in order to improve that impact and value for money of the fund in Wales. The Welsh people deserve nothing less than for both the Welsh and UK Governments to devote themselves and work constructively to ensure that Wales does not lose out financially. Today, it is beholden on Rishi Sunak, the third Tory Prime Minister of the year, to now honour the previous promise to Wales, in that the Welsh people would not be, again, a penny worse off when we left the EU.

Deputy Llywydd, as the Tory cost-of-living crisis deepens, and after the shambolic 'blink and you miss it' premiership of Liz Truss and her mini-budget, the people of Wales deserve and demand that the Tory UK Government do the right thing by them and honour their pledge to Wales.

Yes, thank you so much to the Finance Committee for bringing forward this report. It's very detailed and it's very clear.

Thank you very much to Peredur and the other Members too.

My party's opposition to Brexit is well known. Brexit has had an impact on our standing in the world, on our ability to travel freely, and, importantly, on our economy. It is this economic argument that I suspect we might actually be winning, because in the light of the cost-of-living crisis, as everyone can see, we are likely worse off than had we actually remained members of the European Union. We, the Welsh Liberal Democrats, are calling on the UK Government to rejoin the single market and the customs union, so that we can end the unnecessary bureaucracy that is affecting our ability to trade with our closest neighbours.

Focusing in on the report's findings, it's clear that the structural funds that were available to Wales pre Brexit are not going to be replaced in their entirety by the UK Government, and Wales will definitely be worse off by this metric. This is in spite of the Conservatives' manifesto promise in their 2017 and their 2019 manifestos, that the shared prosperity fund would directly replace EU structural funds. It's even a further concern as well that not a single penny of the shared prosperity fund moneys has been spent in Wales to date, and that Wales will definitely be receiving less than it would have done had we remained members of the European Union.

I just want to focus on one small area, just to finish off, and that's with regard to the report's conclusions on funding for the sciences. The UK Government needs to urgently address the shortfall that Welsh science will experience via the UK shared prosperity fund—the £772 million lost to Wales returned across the next three years. Just think about that number: £772 million that we should be getting for our sciences. But we know that science, particularly in the area of physics, is a boon to our Welsh economy, and we've heard from Mike Hedges around how skills and universities and learning are so important to our country. The Institute of Physics estimates that physics itself is worth around £7.3 billion to the Welsh economy. It's clear that there is some work to be done by Welsh Government in embedding science as part of its forthcoming innovation strategy, but also in attempting to convince the current UK Government of the importance of this sector in terms of investment. Thank you. Diolch yn fawr iawn. 

I'd like to start by very much agreeing with the Welsh Liberal Democrats on rejoining the single market and the customs union. I think the damage done by Brexit is going to be a disaster not just for our generation but for future generations, and I hope that all political parties will recognise that. I don't expect the Minister to reply to me on this point, but I hope that she and her enigmatic smile this afternoon—perhaps I shouldn't read too much into it, but I hope it means that she doesn't at least violently disagree with me. 

In terms of where we are on EU funding, I'm very grateful to the Finance Committee for this report. I think it's a very important report, and it's one that I very much welcome. I think we need to have a realistic debate on where we are on EU funding. I'm afraid that there has been a lot of—how shall I put it; I'm trying to find a different word in my mind from the word 'nonsense' that's written down in front of me—there is a lot of talk about EU funding that I think has been largely misplaced. I well remember a former First Minister, actually, describing it as a once-in-a-lifetime opportunity for fundamental change. But, it was never that, and you can't undo a century of economic decline with a five-year funding stream. You need a funding stream over a number of years. And of course the old Objective 1 status was designed in order to deliver that. It was never going to be a one-off funding experiment, if you like, it was always going to be a part of a wider opportunity to underpin economic development over a number of years. And European Union funding, of course, was always based on the principle of additionality. It was never assumed that it would replace spending from national Governments. And it was always that partnership that was crucial to it. So, we were always wrong to assume that EU funding was a panacea for all our economic difficulties. And EU funding was a part of that jigsaw that enabled us to do far more than we could do ourselves. The additionality meant that we had streams for investment in people, infrastructure and places. And I've seen that in my own constituency.

The UK Government has broken its word, and it is in danger of breaking the union. The External Affairs and Additional Legislation Committee in the last Senedd reported on this subject, and the Deputy Presiding Officer, of course, chaired the committee at that time, and he will remember, as I remember, the then Secretary of State giving an absolute undertaking that every penny of EU funding would be replaced under the new system. And that's something that clearly, whatever the complications we now see, hasn't been delivered. And I think we can be very clear about that. The United Kingdom Internal Market Act 2020 is a destructive piece of legislation that doesn't simply attack this place, but it undermines the UK constitution and the agreed will of the people of Wales. I have to say to Peter Fox that this is also a democratically elected institution, and this place has a mandate, and it has a mandate and powers given not simply by the whim of a Secretary of State but delivered by the people through a referendum, and they have the right for a Government to respect that. Yes?

Will you take an intervention? I accept the outcomes of referendums; it's a great shame that you did not accept the outcome of the referendum to leave the European Union. In your own constituency, 62 per cent of people voted to leave. How have you represented them over the past few years?

I've always stood up—and you, of course, as a Conservative, will be familiar with the work of Edmund Burke, the father of modern Conservatism. And what he said very clearly in his speech to the electors of Bristol is that an elected Member owes his allegiance to the people represented by him, not just by his labour but also by articulating what he believes. And that is what I've done, and I will continue to do it. And I will argue for a democratic mandate to overturn the referendum in 2016. I wouldn't do it through the back door or by legislating to do it without consulting the people. 

So, what we've seen over the last few years is a lack of transparency, no understanding of the purpose or objectives of the new programmes, no co-ordination, the exclusion of the Welsh Government, which is an affront to Welsh democracy, and we've seen a system in its place that is chaotic and a shambles—and that is quoting a Conservative MP. So, let us be absolutely clear for what we need. Where does it leave us? We have a broken system and it's one that needs to be repaired. And the EU model is actually instructive in doing so. I believe that we do require—and a Welsh Government I think has argued for this before—a council of Ministers reaching agreement by consensus rather than receiving diktats being imposed by press release. We need the transparency to be able to argue and articulate our views, and, for the Conservative point of view, we need to understand what are the purposes and objectives of funding streams before they're introduced and not simply reported upon after they've been introduced. And we need to go back to the co-ordination that Huw Irranca-Davies led as Chair of the EU funding committee at the time, to ensure that you bring people together, you don't exclude people and you ensure that Wales is served by all the people it represents. At the moment, what we have is a broken system and we're in danger of having a broken union.

Alun, thank you for taking my name in vain, but in a praiseworthy way there for a moment. But I would say that report is still there and it's still valid, I have to say, and it was put together—. I'll turn to this report in a moment, but that report on the future funding, regional funding, within Wales, I have to say set the benchmark for what we should be doing throughout the UK, and it was OECD reformed, as Llyr actually said. It was supported not only by industry, trade unions, third sector, civil society, post-16 education and so on, and it's there on the shelf, and, to be honest, it did actually have as one of its key elements how we could work cross border with the UK Government, and on a trans-European basis as well. So, I would say to the UK Government still, as well as to Members who may not have seen it: have a look at that report, dust it off. There is no better model for regional funding, not just here in Wales, but across the EU, currently, and the UK Government could take that and turn it into a partnership with the Welsh Government and the way forward.

But let me turn to this report. I think it's brilliant. I've really enjoyed reading it, which might surprise the committee chairman and its members, but the reason I've enjoyed it is because it's very well informed and it also reflects what I and others must have been hearing from businesses and others within their own constituencies. But also, that group that I mentioned that put that piece of work together, many of them are now part of the strategic forum for regional investment in Wales, which is trying to work through some of the difficulties highlighted in this report.

Let me just pick up some of the areas that they've picked up on which are reflected in this report. In the preparation of these bids by a local authority, the immense time burden that it put on—so, it didn't suddenly simplify and reduce burdens, it put the burden firmly and squarely on local authorities to produce bids in a competitive process. Not only that, it put time pressures on them, and those time pressures meant that sometimes they didn't pick the best, they didn't look around and liaise with others—they did their best to do it, but they had to actually say, 'What have we got on the shelf that’s ready? We've got a better project down the line, if we only had a little bit of time to work this up, and we could do it with the neighbouring two or three authorities, but it's not ready, so we're going to have to pick that one, and pick that one and throw it forward.'

And then you've got the fact that it's not that it's just this place that has been bypassed, or that Welsh Government has been bypassed, and—[Inaudible.]—but the idea that, in parts of these funding streams in the early days, you've actually got MPs who were being asked to put forward schemes that had their names on it—not MSs, not local authorities, but MPs. Now, this is quite interesting, because this is good, old-fashioned American-style pork-barrel politics: ‘Here’s my pet project. Minister, I’ll support you. Give me this project here. It may not be the best one for my constituents, but it's the one I want on it.’ Now this is wrong. All I say to colleagues here to my left on the Conservative benches is: you should not do this. One of the lessons from previous ranges of European funding was the criticisms of complexity and the time it took and so on. But the one thing you could say: they were accountable and they were driven on good analysis of need, and it was also informed by bottom-up approaches by communities who said, 'This is what we want.' Now there could be a different model. [Interruption.] I will indeed give way.

I'm grateful to you for that. You'll be aware that the Penprysg railway bridge is something that benefits from the UK Government's levelling-up fund, and your MP colleague Chris Elmore has put his name to that. Are you saying that's the wrong decision?

No, not at all. In fact, I would support that, but my point is this: should it be that one MP, one elected representative, ignorant of the policy framework in Wales, ignorant of the wider needs of the rail network within that area as well, such as the Maesteg and Tondu crossing, which has been waiting for 20 years for the investment from UK Network Rail—that doesn't get a mention—one MP gets to say it, whether it's Chris Elmore or Jamie Wallis or anybody else? It should not be pork-barrel-style politics, and that's my point. There is a better way to do it. I'm running out of time here. Let me just go on to some of the other things—

I have given you some extra time. You have another intervention, if you wish to take it.

Will you take another intervention?

Oh—. Yes, I will. I will.

Would you take another intervention, from me? I understand that a levelling-up funding bid for railway infrastructure was declined by the UK Government and the authority has to put it back in again. But do you agree with me that local authority officers have said it's like going back 10 years now to move forward with this, so it's not really achieving very much, is it?

I entirely agree. We need to move away from this, and it needs to be based on good analysis, needs analysis, and where the money should be properly going. And to pick up on Alun's quite right point, this is not just to do with the current quantum of funding that may be lost, it's to do with long-term sustainable funding that goes to those areas and communities that most need it. We do not have that model. So, let me quickly, with those couple of interventions, just—

I will give you time.

Thank you very much—

But not too much.

—Dirprwy Lywydd. No clarity at the moment from UK Government on future, medium, long-term post-EU funding. No agreement or clarity on the amount lost to Wales or otherwise. Ongoing uncertainty over Erasmus+, Horizon Europe, other European co-operation agreements. Poor or absent—absent—engagement between UK and Welsh Governments. Now, I would simply say to my Conservative colleagues that this has been put upon Wales, not done in partnership, so it's for the UK Government to reach out and say, 'Let's do this together.' That lack of engagement does not fall at the Welsh Government's feet; it falls at the UK Government's.

And finally, that lack of formal role for not just Welsh Government but for this Senedd, for individual Senedd Members sitting all around this Chamber who represent their constituencies—that complete absence. We cannot go forward like this, so I think the recommendations and the conclusions are sound, and I really hope that UK Government and the committees in the UK—both Parliaments—see this and listen to it, as do Ministers. I also hope that this might be part of the discussion when the Welsh Affairs Select Committee visit here this week. Cracking report—well done.

I call on the Minister for Finance and Local Government, Rebecca Evans.

Diolch. I welcome the motion today and would like to thank the Finance Committee for its work and for the report on post-EU funding arrangements, but also to all of those Welsh partners who have engaged so strongly with the inquiry as well and provided such clear evidence. It really is a timely and important contribution to the debate on what is a critical issue, as the UK Government's approach to post-EU funding is not only a deliberate and unacceptable encroachment onto a devolved policy area, but it's also costing Wales jobs and growth.

In its autumn statement, the UK Government appeared to be cutting the UK shared prosperity fund by £400 million in 2024-25 and showing no expenditure in this financial year. It did that despite Welsh investment plans for the fund having been submitted during the summer for projects that should have already started commencing. But I have seen that letter today that has been sent to the Chair of the Finance Committee and we'll look into this further, but it does seem, from what the letter suggests, that the funding has now been subsumed into the DLUC departmental budget in the UK Government, but to what extent it's fully additional we'll still have to explore and get to the bottom of, I think. But I think that just really speaks to the lack of transparency that there is on the part of the UK Government in terms of spending, and how difficult it is, sometimes, to get clarity and how important it is that the UK Government just improves the communication with devolved Governments, especially in areas where they're seeking to exert influence that cuts across devolved competencies.

I think that these actions just demonstrate a real and clear failure of the UK Government to deliver its manifesto pledge to replace EU funding in full. That's just not even up for debate, it's an absolute fact, because, had we remained in the European Union, we would be receiving an additional £375 million every January. But the UK Government has netted off the tail funding that we have in terms of years coming post Brexit. So, it's just unarguable that there is less new money coming to Wales as a result.

I was pleased to set out our workings out. I issued a written statement to the Senedd some time ago now in response to questions from colleagues in the Chamber to set out how we had come to that conclusion. But I think that no Member here today can deny the fact that the UK Government's failures to do what is best for the Welsh economy are just stacking up one by one.

Existing and new EU funding programmes overlap by two years, and the Welsh Government was ready to start a post-EU investment programme almost two years ago, in January 2021, and, by that point, we'd already done a huge amount of intensive work with the OECD and with our Welsh partners to create the strongest possible model for Wales. And it's still completely unacceptable that the UK Government has dismissed that really, really detailed work, and the public consultation, indeed, which supported that, in favour of their own approach, which was, frankly, just cobbled together at the last minute earlier this year. And the consequences of the UK Government's post-EU funding approach are really stark. So, the SPF distribution formula redirects economic development funds away from those areas in Wales where poverty is most concentrated, and we've seen such actions celebrated by our current Prime Minister in terms of moving funding from the areas where it's needed most to those areas that are more affluent.

Local authorities are being put under enormous strain due to unfeasible timescales now for developing plans and projects and putting in place the administrative and the governance arrangements that have to sit alongside their proposals. And also, really importantly, universities, colleges, the third sector and businesses have been completely shut out of directly accessing funding, and it leaves many of those sectors now reporting redundancies and the closure of vital services—absolutely really harmful, real-world effects on Wales as a result of the existing situation. 

The Welsh Government's being denied access to the SPF to support previously EU-funded pan-Wales programmes that are absolutely critical for productivity and growth—for example, Business Wales, apprenticeships, the development bank and our innovation schemes. And because of the low funding levels, the short timescales, the inflexibility, local authorities are being forced, as we've heard, to select those smaller suboptimal projects, which will risk not having real impact.

Our rural communities, of course, are £243 million worse off than if we'd remained in the EU, because the UK Government has deducted the EU receipts due to Wales for work that was part of the 2014 to 2020 rural development programme. And, of course, political delays in formalising the UK's association to Horizon Europe mean that universities and businesses in Wales are losing out on access to vital research and innovation funding.

Bypassing the Welsh Government and this Senedd risks duplication and blurred accountability, and this is already demonstrated by the way in which the UK Government is handling the delivery of the Multiply scheme and its failure to response meaningfully, I think, to the Finance Committee's specific recommendations on this. These actions also need to be seen in the context of our Welsh budget settlement, which, of course, as we've heard earlier today, is worth £1 billion less next year, and the approach also undermines devolution and has little regard, actually, for the wishes of Welsh partners.

So, turning to the committee report's recommendations, we accept all of those that are directed towards the Welsh Government, and we'll continue to work with partners to mitigate as much of this disruption and the consequences as we can. This includes brokering collaboration between sectors and supporting local government with their plans. We also continue to hold our regular meetings of the strategic forum for regional investment in Wales, chaired by Huw Irranca-Davies, to share information and lessons learned amongst Welsh partners. 

In regard to the report's recommendations for the UK Government, we are grateful for the committee raising these important points. The UK Government's response to the report, I think, is regrettably dismissive, and it fails to meaningfully address many of the recommendations and, once again, of course, it refuses to accept the enormous loss of funding that's now being felt by communities across Wales. 

A responsible UK Government would put the needs of the Welsh economy first and listen to us, our partners and a range of independent experts and cross-party groups, who have urged UK Ministers to take a different approach—an approach that involves co-decision making and would deliver much better value for money and economic impact. A substantive discussion on post-EU funding is planned at the next Finance: Interministerial Standing Committee, which, I think, is due to take place early next month and which I will be attending. 

We were able, as we've heard, to work more constructively together, and more successfully, on the issue of free ports. It is vital that the UK Government replicates that more productive approach in the delivery of post-EU funds and other UK funds using the internal market Act. That will mean, then, that we can better address together Wales's long-term structural challenges and maximise the opportunities in support of our mission to create a stronger, fairer and greener Wales.

I call on the Chair of the committee to respond to the debate.

Thank you, Dirprwy Lywydd, and I thank everyone for taking part in this debate this afternoon.

It highlights the complexity and the emotive matters that we have been discussing this afternoon. Just briefly, a few comments on the speakers. Peter, to start with, talked about that lack of engagement and that complexity of not talking to each other. Mike, then—one point to make is that Simon Hart didn't send us the workings, but Robert Buckland did, so we did have some of that information. But, I think you have designed our new motto as a committee, 'Show your working'. I think that keeps coming up every time, so to any Minister listening or anybody coming to speak to us in future, then 'Show your working' would be a very important thing.

Llyr talked, again, about there being a long way to go to deliver on the promises made. Thanks to Rhianon and Jane, also, for talking about the promises that were made. Alun and Huw talked about the long-term funding arrangements and the long-term planning, and there were kind words from Huw there about the report itself and, obviously, the other report that started some of this process. I know that other committees are looking to take this work on and look at this further. I believe that the economy committee is going to start some work on this next year as well to keep this conversation going and to keep this dialogue going. This investigation that we did was a deep dive—an initial look at this—and it needs further investigation.

Then, thank you to the Minister for her comments, highlighting again some of the inflexibility that I talked about in some of these funds and that dialogue between the two Governments not happening. The one thing that we need to bear in mind is that it's our communities—our most vulnerable communities—that are affected by all of this, and it's those people whom we see out there in the real world, as it were, who are affected by the bun fight, if you like, on who's paying for what and what money is going where. So, we need to have better communications.

To close, Dirprwy Lywydd, this report shines a light on these funding arrangements and, more importantly, on how the funds operate in Wales and their impact on the communities that need them most. I would like to thank Members and the Minister for their contributions today. I believe that this is the first committee inquiry to be conducted on this issue in the current Senedd, and I hope that it provides solid foundations and establishes helpful principles for the scrutiny of these funds in future. We all want to see Wales receiving its fair share and I hope that this report contributes to ensuring that this happens.

Before closing, quickly, I would like to thank the organisations and individuals that provided evidence to our inquiry, and the clerking team, for their commitment to the process. To ensure that these new funds have maximum impact and reach the right places and people, we need a grown-up approach based on mature discourse and clarity. I am pleased that the UK Government and the Welsh Government have extended opportunities for each other to engage more, and I agree that there should be a genuine co-decision-making function for Welsh Ministers in order to improve the impact and value for money of funds and investments in Wales. Thank you very much.

The proposal is to note the committee's report. Does any Member object? No; the motion is, therefore, agreed in accordance with Standing Order 12.36.

Motion agreed in accordance with Standing Order 12.36.