The following amendments have been selected: amendment 1 in the name of Darren Millar, and amendments 2 and 3 in the name of Rhun ap Iorwerth. If amendment 1 is agreed, amendments 2 and 3 will be deselected.

Item 7 today is the debate on levelling-up, and I call on the Minister for Economy to move the motion. Vaughan Gething.

Motion NDM8449 Lesley Griffiths

To propose that the Senedd:

1. Notes:

a) the UK Government’s levelling-up policies leave Wales with less say over less money while bypassing and actively undermining devolution and this Senedd;

b) the Shared Prosperity Fund has been an abject failure as a replacement for EU funds in Wales, leaving a shortfall of nearly £1.3 billion; and

c) the Shared Prosperity Fund, Levelling Up Funds and Multiply Programme have been beset by UK Government delays and mismanagement, putting strain on local authorities and resulting in the closure of important programmes.

2. Calls for the return of regional investment funding to the Welsh Government to deliver in line with devolved policies that are fully accountable to the Senedd.

Motion moved.

Diolch, Dirprwy Lywydd. I move the motion before us. It is a sad reality that UK Government levelling-up schemes are failing our people, businesses and communities. These were supposed to replace former EU funds. It is a staggering betrayal of referendum and manifesto promises that Wales is now almost £1.3 billion worse off in real terms. All UK Government schemes, whether it is the levelling-up fund, the shared prosperity fund, the community ownership fund, or the towns plan, have the same things in common: they’re an incoherent mess with very little planning, consultation or economic logic. Their implementation is chaotic, leaving stakeholders confused or excluded entirely. At the same time, they put immense pressure on local government to spend money quickly, despite UK Government delays and implausible deadlines. They have ignored the lessons of 20 years of experience, with small piecemeal projects that have significantly less economic impact than the larger strategic investments that this very Senedd has recommended that the funds are used for. They take money and powers away from Wales, putting them into the hands of Tory Ministers in Whitehall. Wales has less say over less money. That is a deliberate Tory choice—to centralise plainly devolved funds and responsibilities.

Since 2021, the levelling-up fund has been plagued by chaos and delay. Of course, the UK Government initially announced the levelling-up fund as an England-only scheme; they then changed their minds and imposed it on Wales without a squeak of protest from the Welsh Tories. This has denied the Welsh Government and this Senedd any say or any scrutiny over decisions taken in areas that are plainly devolved. The result is a fund that has pitted our local authorities against each other, wasted resources, and chooses not to recognise the relative needs in Wales or within Wales.

Flintshire, Merthyr Tydfil and Newport will not see a penny of the levelling-up fund or the shared prosperity fund—sorry, the levelling-up fund—while huge amounts of time and expense have been wasted by councils across Wales on bids that have been turned down by the UK Government. Dirprwy Lywydd, this would not be the way that we would choose to invest in Wales and work with our partners.

UK Government delays in decision making have driven up costs during a Tory cost-of-living crisis, with soaring inflation that has loaded extra pressure onto our councils. This scale of this impact was highlighted by the National Audit Office in November. It reported levelling-up projects were unlikely to meet deadlines due to:

'Inflationary pressures, skills shortages and wider construction industry supply challenges' and UK Government delays in decision making and implementation.

Is it any wonder that so many independent organisations and cross-party groups have concluded that the UK Government's so-called levelling-up approach is failing?

Last year, the Institute for Government said the levelling-up fund

'is another ineffective competitive funding pot that is neither large enough nor targeted enough to make a dent in regional inequalities.'

The UK Parliament levelling-up committee said:

'It’s concerning that DLUHC does not even appear to know which pots of money across Government contribute towards levelling up. '

And in 2022, the National Audit Office said:

'DLUHC has received expert advice that major physical regeneration could significantly improve local economic outcomes, but the smaller-scale infrastructure investments it is funding through the Levelling Up Fund do not usually drive significant growth.'

That's polite for: they've designed something that is not going to work; they're squandering public money.

I could cite many other examples, but I just don't think there's enough time for that today. However, I would like to thank again the Economy, Trade and Rural Affairs Committee for its report, which shares our concerns. In real terms, Wales has been left with a shortfall of almost £1.3 billion in unreplaced EU funding due to the ongoing impact of inflation in this period.

Key growth sectors like universities have already reported the closure of vital schemes and 1,000 job losses. Research and development is an area where there has already been a historic lack of investment by the UK Government; that is now compounded by the loss of replacement EU funds, but higher and further education have been excluded from research and development. Meanwhile, the UK Government's levelling-up intention to increase R&D funding outside the south-east of England by 40 per cent would mean only an extra £9 million of additional expenditure in Wales by 2030.

The Tories made a clear-sighted choice to freeze the Welsh Government out of replacement EU funds. That has forced budget cuts that supported for apprenticeships, Business Wales and SMART innovation schemes.

Last week in this Chamber, we saw a river full of crocodile tears from the Tories, complaining about budget cuts in the Chamber while supporting and being cheerleaders for the UK Government's fresh round of austerity measures, rather than restoring funding to fragile public services, money to support the economy. This means that, on top of the near £1.3 billion loss of EU funding, our budget for the year ahead is £1.3 billion less in real terms than expected at the start of the 2021 spending review. I know the Conservative spokesperson rolls his eyes, but those are the facts of the matter, and every now and again even a Welsh Tory should be prepared to stand up for Wales.

To compound existing financial pressures, there is a real risk that these funds, loosely branded as levelling up, will not reach Wales at all. The UK Government has told local authorities in Wales that it will not release full shared prosperity funding for the year ahead until they meet spend thresholds from previous years, and yet the UK Government's chaotic design and delay is the root cause of the problem. Delays were the not the responsibility of local government; delays were absolutely the responsibility of Tory Ministers in Whitehall.

Let's not forget that so many of these issues would have been avoided if the UK Government had respected devolution and allowed us to manage funding through our framework for regional investment, if the Tories had respected two devolution referenda, multiple elections and more than 20 years of devolution. Our framework uses the Well-being of Future Generations (Wales) Act 2015 as the bedrock of policy making. It was developed properly, with Welsh partners and the Organisation for Economic Co-operation and Development, and backed by a public consultation. None of that happened in the design of the levelling-up agenda by the Tories in Whitehall.

Wales already faces the toughest financial settlement since the start of devolution, and yet Darren Millar's Amendment claims that Wales is better off to the tune of £2.5 billion, thanks to levelling-up funds. He is not comparing EU funds with their supposed replacement. Claiming that we are actually £2.5 billion better off is simply not true, and they know it is not true. The legacy of levelling up is duplication, local piecemeal projects, and precious little economic impact.

Plaid Cymru raise these failures in their own amendment, but we can't support the amendment as we've yet to see the detail of the proposed economic fairness Bill, and we have already set out in the Welsh Government's 'Reforming the Union' paper the need for a new, principles-based approach to UK funding, overseen by an independent body.

The delivery of the levelling-up agenda is unforgivable and deeply damaging. With ineptitude and indifference, the UK Government has wasted the opportunity to deliver meaningful change that Wales and the rest of the UK so desperately need. I look forward to the contents of this important debate through the rest of the afternoon.

I have selected the three amendments to the motion. If Amendment 1 is agreed, amendments 2 and 3 will be deselected. I call on Paul Davies to move amendment 1, tabled in the name of Darren Millar.

Amendment 1—Darren Millar

Delete all and replace with:

1. Notes that UK Government levelling-up funding in Wales exceeds £2.5 billion, delivering projects to transform communities, create jobs and grow the economy.

2. Notes the Economy, Trade and Rural Affairs Committee’s report into Post-EU Regional Development Funding and its recommendations.

3. Calls on the Welsh and UK governments to undertake a review of whether the different elements of the Shared Prosperity Fund should be delivered at local, regional or all-Wales level.

Amendment 1 moved.

Diolch, Dirprwy Lywydd. I move the Amendment tabled in the name of my colleague, Darren Millar. I'm very disappointed that the Minister has used this debate to once again take political pot shots at the UK Government, rather than focusing on how the system can be improved for the future. He should be getting on with his job, rather than whipping up the issue just to show off to his party members. It's hardly very statesmanlike from someone hoping to be the next First Minister.

Now, for those of you that haven't already taken the opportunity to read the Economy, Trade and Rural Affairs Committee report on post-EU regional development funding, I'd strongly encourage you to do so. Whatever the Minister says, that cross-party report provides an objective, unbiased and in-depth analysis of the delivery of post-EU funding to date and offers some genuinely constructive recommendations for both the UK Government and the Welsh Government, and I'm grateful to everyone who contributed to that inquiry and helped the committee shape those recommendations. Through their evidence, Members were able to gain a real understanding of some of the challenges that have been faced by organisations and hear about some of the opportunities that could help strengthen the system for the future.

Now, the quantum of funding awarded to Wales in the shared prosperity fund has been a key area of disagreement between the Welsh and UK Governments, and today's motion again, sadly, reflects that disagreement. Now, Professor Steve Fothergill from the Centre for Regional Economic and Social Research at Sheffield Hallam University best articulated this disagreement when giving evidence to the committee, by explaining that, and I quote:

'It's a very odd situation to be in, to say that both parties are right in all of this, but they are, because they're looking at rather different things. One's looking at actual spending in financial years, and, in that sense, the UK Government is correct; the Welsh Government is looking at financial commitments, which is a different measure, and Vaughan Gething is correct on that front.'

Unquote. And while the two Governments continue their inter-governmental dispute on the quantum of funding, we need to be mindful that this disagreement could overshadow discussions over the effectiveness of spend and whether the investment is, as the Bevan Foundation put it, adequate to the scale of need.

So, let's talk about the effectiveness of spend and whether levelling-up funding is delivering benefits in Welsh communities. The Baglan Bay Technology Centre in Port Talbot is now open for business and is the first of its kind in Wales, offering high-tech office and laboratory space to a host of innovative companies. Rhondda Cynon Taf received just over £20 million in funding for projects such as the Porth transport hub, the Muni Arts Centre and the A4119 Coed Ely dualling scheme.

Projects like this are making a difference, and when positive outcomes like this are made we should celebrate them. However, that's not to say that the delivery of these funds has been straightforward. There have been delays and, arguably, a lack of clarity over the delivery of these funds, and that's why the Economy, Trade and Rural Affairs Committee has called for a review to take place to examine the different elements of the shared prosperity fund and look at what should be delivered at a local, regional or all-Wales level, based on what works best.

The evidence that the committee received indicated that Welsh local authorities were pleased with the opportunity to decide priorities locally and to have control over delivery. However, the committee also heard that tight timescales to develop investment plans, delays to approving these and the short time frame to spend funds had an impact on the ability of local authorities to plan and deliver projects. And so lessons must be learnt to avoid repeating past mistakes, and it's the committee's view that, at the heart of this, a much more constructive inter-governmental relationship is needed going forward. When both Governments work together in partnership, Wales benefits. And we've seen evidence of that with the free port programme, the city and growth deals, and, more recently, the creation of investment zones in Wales.

Now, I understand the Minister’s view that funding for devolved functions should come to the Welsh Government for Welsh Ministers to allocate in line with its priorities and be subject to the scrutiny of the Senedd. But, Dirprwy Lywydd, the people of Wales are served by two Governments, and the problem with this issue is that the Welsh Government believes it should be solely responsible for the delivery of these funds, but, on the other hand, the UK Government believes it should be solely responsible for the delivery of these funds. However, my view is clear—they should be working together on this matter, because, by working together in partnership, our communities can be transformed. And so I urge both Governments to get on with it and work together in the interests of the people of Wales. I believe that both Governments could and should focus less on the politics of the funding and instead use their time and efforts improving the system so that it can do exactly what it is designed to do, which is transform and support innovation in our communities.

This is a live issue, and one that the Economy, Trade and Rural Affairs Committee will continue to monitor, of that you can be assured. But today I'm calling for some grown-up politics in identifying the problems that have been seen in delivering this funding, and a commitment to jointly address those problems so that they do not continue in the future. Therefore, Dirprwy Lywydd, I urge Members to support our amendment, which is a factual, objective statement that commits to seeing genuine progress on this front so that we can see funding devolved to projects—

Will you give way, Paul?

—that will transform our communities.

The Member had already gone out of his time; I would not have allowed the Intervention. 

I call on Rhun ap Iorwerth to move amendments 2 and 3, tabled in his name.

Amendment 2—Rhun ap Iorwerth

Add as new points after point 1, and renumber accordingly:

Believes the UK Government’s levelling up policies are not conducive to intra-Wales fairness and have resulted in a postcode lottery of economic support across Wales exacerbating regional inequalities between Wales’ communities that Welsh Government have also failed to address.

Believes that all decisions about how money is spent in Wales should be made in Wales.

Regrets the historic underfunding of Wales as a consequence of the outdated Barnett Formula which compounds the effect of the shortfall in funding from the Shared Prosperity and Levelling Up Funds.

Amendment 3—Rhun ap Iorwerth

Delete point 2 and replace with:

Calls for:

a) the return of regional investment funding to the Welsh Government to deliver in line with devolved policies that are fully accountable to the Senedd;

b) an Economic Fairness Bill (Wales)—guaranteeing fair funding based on Wales’ needs;

c) the rectification of the unfairness across Wales’s current funding and financial settlements, for example by redesignating HS2 and Northern Powerhouse Rail as England-only projects, providing Wales with resultant consequential funding.

Amendments 2 and 3 moved.

Thank you, Dirprwy Lywydd, and Plaid Cymru has introduced a number of amendments in order to highlight some of the injustices caused by the levelling-up agenda of the Conservative Government in London. The ironic title, 'levelling up', or 'ffyniant bro', which is used in Welsh—the truth is that post-EU funding arrangements, such as the levelling-up scheme, are just one example of the unfair and unjust funding system that Wales finds itself part of, one that deprives our communities of investment, one which pits one community against another far too often, and holds us back as a nation from reaching our potential. And although my party and the party of the Welsh Government do share much common ground in terms of our views on the post-Brexit scenario, the Government motion today, as it stands, fails to address the broader issue. 

There are significant weaknesses in attitudes taken by Governments, both Conservative and Labour, on principles around inter-UK and intra-Wales economic fairness. In terms of intra-Wales fairness, the formula for allocating the shared prosperity fund differs significantly from the previous EU funding. It doesn't have a needs-based mechanism at its core, which leaves some of our most deprived communities significantly worse off. This despite, of course, the Tories repeatedly promising that European funding would be replaced pound for pound.

The Institute for Fiscal Studies found that, under EU funding arrangements, the most deprived regions, such as west Wales and the Valleys, received 83 per cent of total EU funding given to Wales—almost three times as much per person as better off areas of Wales; that's what levelling up genuinely means. But, under the new UK shared prosperity fund, that figure falls to 73 per cent, and what that tells me is that we're heading in the wrong direction when it comes to trying to fight against the inequalities that are rife within our communities.

On levelling up, the levelling-up funding itself, in its most recent round, 11 local authorities in Wales didn't receive a single penny from it, and this includes some of our most rural and deprived communities, where housing crises, poor infrastructure and persistent underfunding from both UK and Welsh Governments have become commonplace. And because of the lack of that like-for-like EU replacement funding, the difficult situation those communities were already facing deteriorates even further. We've seen, haven't we, in recent times, with the Fflecsi Bwcabus service in west Wales, the end of a service that was such a lifeline to people, preventing those who were reliant on it, such as older people and students, perhaps, from travelling to support local businesses, accessing vital services, getting to work, getting to education, seeing their friends, seeing their loved ones.

On top of that, in constituencies that did receive money from the levelling-up fund, like my Constituency of Ynys Môn, a restrictive bidding process with unreasonably tight deadlines means that the money that is being awarded isn't being spent to benefit the whole area, but rather just one small part of it. I've worked very closely with projects in Holyhead, and I'm delighted that projects there have been able to receive funding, but it's very, very frustrating—[Interruption.] If you'd like to give way.

I'll happily give way. I'm delighted to hear that you're making some effort to work with people in Holyhead. I hope that that effort includes working with the local MP, Virginia Crosbie, who of course has been delivering on her commitments to the island, working hard to deliver the free-port status that will really help that island thrive. And on the subject of levelling up, wouldn't you agree with me that we need to see some levelling up within Wales, where we see an inherent bias in the way that the Welsh Government distributes funds in this country in the south, and not in the north?

I'm so pleased that you gave me an opportunity to remind everybody that the Conservative MP for Ynys Môn, as with the Conservative Party as a whole, was more than happy for Holyhead, for Anglesey, to receive £8 million in free-port funding compared with the £26 million given to each English free port. We stood firm, and I worked with Welsh Government on this. We accepted—

You opposed it.

The Member says I oppose free ports. I made the case for a free port with the level of funding that we were getting, that we were not being offered by the Conservatives. I made the case for a free port protecting workers' rights when the Conservative MP couldn't give a monkeys, and I made the case for environmental regulations. And, I made the case—[Interruption.]

Darren, let the Member respond to your Intervention.

And I made the case, as I was expressing, for levelling-up funding to be distributed across the whole of the island. I was delighted when communities in Holyhead were able to receive funding, but I'm angry that communities in Amlwch were denied the opportunity to get that funding. Communities that have been suffering from poverty for many years, because of the actions of a Conservative Government, were unable to be given the money that they were owed. It's because of the lack of flexibility that was rife within the system. 

Now, the UK Government's reprioritisation agenda is a clear reprioritisation away from Wales's material needs, and disproportionately benefits areas that are already disproportionately benefited. We've seen from The Guardian's analysis that Conservative marginal seats received one and a half times the amount of funding per person than other constituencies. In the red wall seats where the Conservatives won in 2019, it was twice the amount of money. This is pork barrel politics. This is democratic corruption by the Conservative Party. It is about time—[Interruption.] It is about time that the Conservatives accepted that they have wronged our communities by funnelling funds towards their own projects rather than genuinely building up prosperity, which is what Plaid Cymru pursues, through the legislation that we seek in Westminster, calling for an economic—

I have been generous in the time to allow you an Intervention, but you need to come to an end now, Rhun.

The Intervention itself was generous, and I'm happy to accept your generous additional time.

But we do need that economic fairness Bill to make sure that Welsh funding unfairness is addressed, and I ask you to support Plaid Cymru's amendments today.

If levelling up is going to work, it has to be about increasing gross value added and median salary. It's not about doing nice things or prettying up areas, important as they are; it's about creating more high-paid employment. The Westminster Government says:

'not everyone shares equally in the UK’s success. While talent is spread equally across our country, opportunity is not.'

That's correct.

'Levelling up is a mission to challenge, and change, that unfairness. Levelling up means giving everyone the opportunity to flourish. It means people everywhere living longer and more fulfilling lives, and benefitting from sustained rises in living standards and well-being.'

What can you argue with that about?

'This requires us to end the geographical inequality which is such a striking feature of the UK. It needs to begin by improving economic dynamism and innovation to drive growth across the whole country, unleashing the power of the private sector to unlock jobs and opportunity for all. While there are world-leading and enterprising businesses and innovators right across the UK, economic growth and the higher productivity which drives it has been over-concentrated in specific areas'— basically, London and the south-east of England.

'A long tail of low-productivity businesses and places explain why UK productivity growth is too low compared to competitors.'

The latest figures I have been able to access on GVA are that it's £48,857 per head in London; £29,415 in the south-east; and £19,899 in Wales. On median salary, London £49,899; south-east of England £36,580; and Wales £32,000. And why is this? On life sciences, 24 per cent of the life science employment is in the south of England; 11 per cent of life science employment is in London; 4 per cent of life science employment is in Wales. If we only had our population proportion, it would be up to 5 per cent. The top-10 cities in the UK for ICT employment are Bristol, Manchester, Birmingham, Nottingham, London, Edinburgh, Leeds, Belfast and Newcastle. You may have noticed that not one of them is in Wales. This is why we need levelling up.

But what levelling up has provided so far is good projects, nice projects, but things that are not going to increase GVA or median salary. There's been £18 million to encourage healthier ways of travel in Powys; £20 million to transform the site of Barry docks waterfront into a vibrant public area; more than £15 million towards renovating a number of derelict buildings and creating more green areas in Llanelli town centre; £20 million for project developments to boost areas in Denbighshire, such as Rhyl, which include regenerating the town centre; and £12 million to restore and reopen the historic grade II listed Newbridge bridge. I mean, these are all nice things. These are all good things. These are all good for the community. What they are not is levelling up. For levelling up, we need higher paid employment. We need good-quality jobs.

So, what we need is to do at least some of these: have at least 20,000 additional civil service jobs at all levels relocated into Wales. As people who know Swansea are well aware, the civil service jobs in the area provide good-quality jobs. That should be happening everywhere. Financial support for universities to support research and development. That was raised by the Minister. We really do need to get more research and development done. If we intend to become a wealthier area, you need to have research and development. You need to grow out of the universities to develop employment in high-paid and high-skilled sectors, such as ICT, life sciences and financial services. We need more highly paid jobs. That's what levelling up is about, and if levelling up has worked, we'll see greater GVA  and a higher median salary in Wales. That's what we've got to be aiming for. Lots of nice things, fine, but that's not levelling up; that's just doing nice things. Thank you, Presiding Officer.

We've already heard mention of the Economy, Trade and Rural Affairs Committee's report into EU funding, and I'd echo the Chair in saying that if there are Members in the Chamber who haven't read it—though I assume everyone has spent the time to read it—then please do read it. It was a really good piece of work, and I think as a committee we're very proud of the work we produced in that inquiry.

Of course, it does highlight many flaws and many issues associated with the replacement of post-EU regional funding streams: the short termism, the duplication of work, accountability, pitting communities against each other are just a few to list. But one particular area that we are now seeing that is hugely noticeable is the effect that it has on apprenticeships. And we'll no doubt hear more tomorrow, but we already know the potential devastating impact of the loss of EU funding in this area. It's undeniable, and it will be an impact that goes beyond just simply education. It will also be felt across the economy. 

However, I wanted to echo my colleague Rhun ap Iorwerth's concerns regarding fairness. Ultimately, it goes without saying that all decisions about how money is spent in Wales should be made in Wales, but it's not just about Welsh Government having control of the administration of the shared prosperity fund and the levelling-up fund; it also comes down to the quantum simply not being enough, and the mechanisms and formula behind the funds not being fair. If we want to see real economic development in Wales and real parity between our communities, we must have control of our own finances, over all of our own decisions, and not diktat from Westminster.  

But once those powers are within our hands, there does lie another challenge: how do we ensure that regional development actually happens? How do we ensure that we end the postcode lottery of economic development and an investment that is worthwhile for our communities? That's where I think the idea of an economic fairness Bill comes into play. We bake it into our new system. Because experience has shown us that even when we had the power to direct EU funding, the effect on our most deprived communities was minimal.

So, yes, you'll find no better proponents of the principle that spending in Wales should be decided in Wales, but if and when the time comes for those powers to be in the hands of the Welsh Government, how do we ensure that we don't repeat the mistakes of the past? How do we ensure investment is done right and done fairly across all of Wales's communities? Those are the questions we also need to consider.

Will you give way on that point?

I was just about to finish, but of course I'll give way; I have time. 

Thank you so much for giving way. Can I suggest—? I think the report the committee brought forward was very, very good, but can I suggest that you go back and look as well at the framework for regional investment? That was an 18-month piece of work that involved every piece of Welsh civic society, the voluntary sector, businesses, colleges, universities—everybody was involved in it. It ran alongside an Organisation for Economic Co-operation and Development piece of work as well. And since we've brought it forward, unfortunately, because of the reluctance of UK Government to engage with us—. And it would, Paul, have dealt with that issue of Governments working together, but also local, regional, grass roots upwards, their ideas of what could work. Have a look at that again because the model is there and it needs a tiny bit of dusting off, but the model is there about how we spread that fairness to every part of Wales.  

I would agree there's no point reinventing the wheel where we have plenty of work that's already been done on this, and I think, actually, looking at how we can ensure that local authorities, that grass-roots level, are empowered by any new system we put forward is going to be key here, because ultimately our local communities know what they need and know what's going to best suit them. And on that point, Dirprwy Lywydd, I will conclude. 

I take a somewhat different view to other Members in this debate. My view is that levelling up is dead. It was only ever a public relations exercise. It was never a serious economic policy. It was only ever about photo opportunities and pork barrel politics. But what killed levelling up and killed any sense that levelling up was a serious policy of Government was the announcement on HS2. The fact that the United Kingdom Government will not now spend money connecting the cities of England means that any pretension to serious policy intent has ended. HS2 is now simply a fast railway connecting Birmingham and London, apparently so consequential to Wales that we will be deprived funding because of the economic benefit that we will feel as a consequence of this. That is simply not serious economics. Nobody takes it seriously.

We need to be absolutely clear that if we are serious about any form of—you’ve described levelling-up across the United Kingdom—investment in the United Kingdom, then we need serious politics to do it. It’s not simply about the quantum of funding available, although clearly that is important. It is also about how that funding is distributed. What really frustrated me about some of the politics around levelling-up and the policy issues around levelling-up is that the UK Government has repeated the same mistakes as the Welsh Government made around Objective 1 20 years ago. None of the work or the lessons learned were applied in the application of any of the funding streams that we’ve seen delivered in the five years. So we haven’t had a learning of lessons, we’ve had a repeating of mistakes.

But this is not only an example of a single policy failure. I believe it is more than that, Deputy Presiding Officer. It is a failure of philosophy, of mindset, a failure of culture—it is a historic failure of the United Kingdom to be a United Kingdom. We all know, every single one of us, no matter in what part of this Chamber we sit, that had the money that was required to connect Manchester, Leeds and the cities of northern England with HS2 been required in London or the south-east of England, that money would have been found. Had the money to electrify the railway to Swansea been required in London, the money would have been found. We all know that to be true, every single one of us, because it was found, to deliver Crossrail.

The United Kingdom is the most unequal state in western Europe. In this way, I believe the United Kingdom is more than simply a state with inequality—it is a failed state. And Wales is not alone in experiencing the human consequences of this failure. The United Kingdom has created great wealth by the people living in these islands throughout the last century, but that wealth has been concentrated in a single class and a single geography, and that concentration of wealth and privilege is no accident—it is the direct consequence of policy. And let’s be absolutely clear about this: that same policy has been delivered whoever has been the resident of Downing Street.

Of course the United Kingdom is stagnating today. The toxic combination of low growth and flatlining economic activity as a consequence of austerity and Brexit means that many of the people that we represent here are suffering most, are seeing the reality of this. But let’s also be clear: Britain was fundamentally unequal, an unequal society, long before austerity, long before the financial crisis. Britain, in fact, has been designed to be unequal. So we need to address these issues, and we don’t simply need to rebadge levelling-up as something different—Labour levelling-up as somehow different to Conservative levelling-up. I believe that the crisis we are facing, and the crisis upon crisis that we have faced, forces us to think harder about the challenges facing us.

We saw before Christmas that the Conservative Government was willing to deliver a needs-based funding formula for Northern Ireland, so why not Wales? Why not Wales? Why not the people I represent? Why aren’t they entitled to the same fairness that the people of Northern Ireland seem to be entitled to? We need to be far more radical in our thinking. [Interruption.] I’ll give way.

I'm grateful to you for taking an Intervention. I completely agree with you that the Barnett formula is past its sell-by date and we need a new needs-based formula. When this matter was last considered, by the commission that was established by the Welsh Government, it actually proposed a level of funding that was less than the current arrangements, which are currently £1.20 for every £1 spent on a devolved service. So there is a risk, of course, that a needs-based formula may give us a less good settlement than is currently being received as a result of the agreement between the UK and Welsh Governments.

Absolutely. I'm not suggesting there are guarantees about the future. We can't guarantee what's going to happen tomorrow night, let alone what's going to happen in the next decade. But what we can guarantee is a level of fairness, and my next sentence, Darren, was going to be that these matters are determined by an independent funding commission and not by the Treasury. Because the one thing that every department of state, wherever they sit, whether it's in the Welsh Government, the Scottish Government or any part of the Westminster system, will tell you is that the Treasury always wins. The Treasury always wins. And what we've got to do is to move these decisions away from the Treasury. There's a very good model of that working in Australia and elsewhere in the world.

But we need to be more radical. We need to be more radical about the challenges facing us. We need to have a far more clear-sighted view of fairness in these islands. Wales has suffered unfairness down the decades, down the last century, but so have other parts of the United Kingdom. The United Kingdom has been established—

You need to conclude now, Alun, please. 

—as a state to fund the rich and the south-east of England and the London financial community. If the United Kingdom is going to succeed, then it has to be more than that. 

For years, EU funding filled critical gaps in our finances. Surely, everyone must agree on that. Unable to raise taxes or borrow substantially for major projects, we relied on their schemes as a vital investment lifeline. As part of the EU, Wales secured moneys for our country's needs. The replacement funding from Westminster offers less money with tighter controls.

In terms of local authorities, local democracy is eroded rather than empowered by the bidding system. It's pitting authorities against each other in a scramble for limited funding and using up scarce local authority capacity. This competitive model inevitably picks winners and losers at the discretion of the Conservative Government. Well-resourced councils with expert bid writers can submit more polished proposals, whilst less affluent councils divert scarce resources into, sadly, unsuccessful bids.

Stepping back, surely we can all agree the principles of national funding. For Wales, it should be that we decide on our funding, we decide on a fair basis according to need here in Wales—that it shouldn't bypass devolution. It should be for strategic projects that enhance Wales, such as infrastructure, which have been well thought through and well evidenced. It should not pitch our local authorities against each other, and should not be about the resources that local authorities do or don't have. And it shouldn't duplicate projects.

On this issue, the Federation of Small Businesses has noted that by not involving the Welsh Government in decisions there is an inherent risk of duplication and overlap, particularly where net-zero initiatives under the shared prosperity fund may clash with those available under the Development Bank of Wales.

Finally, if we really want true levelling-up, which I think we all want, Wales requires enhanced devolution. We need to ensure that Wales delivers sustainable development that works for every single person here in Wales. Diolch yn fawr iawn. 

If the UK Government really wanted to level up, it should properly fund public services and all those employed in them. They're one of the biggest employers in Wales. I'm pleased to see that the Economy, Trade and Rural Affairs Committee's report into post-EU funding last term said that delivery would be greatly improved with Welsh Government involvement. Wales was a net beneficiary of EU funding. It recognised the inequality.

As the report says, west Wales and the Valleys' GDP per capita was roughly just 70 per cent of the EU average, compared to inner London west, which has a GDP per capita of well over 600 per cent of the EU average. The levelling-up funding process is extremely competitive and places huge pressures on already stretched local authorities. Developing bids of this kind is resource heavy and expensive. I'm aware that one unsuccessful bid cost approximately £100,000. The UK Government gave some contribution, but not enough. And the bids caused a massive distraction.

If councils could provide an early expression of interest to the funding bids, such as with the lottery and the previous funding streams, and then be given a green light to go to the next stage, that would be helpful and would save wasting a lot of time and money. Flintshire, for example, has been unsuccessful at each of the funding rounds for large projects. They were told the bids were strong but that the process was too competitive. This was extremely disappointing, as one joint bid was to improve the Wrexham to Bidston line and for a station at Deeside industrial park, which is much needed for residents across north Wales to access jobs and fill the vacancies employers are desperate to fill. That would have been really helpful levelling-up.

Local councils have also had to work miracles to make a success of shared prosperity funding, faced with late payments from the UK Government, a total lack of clarity on how to allocate funds, and timescales that are far too tight. The UK rulebooks are so embryonic that the Government seemed to be making it up as they went along, leaving council administrations to work in the dark.

Despite these challenges, local authorities have used their expertise to deliver funding for projects that are actually really useful on the ground, as they were under the previous rural development programme. But, unfortunately, it has taken so long to deliver the programme, the community projects, which are really welcome, are short-lived and they really could have done with a whole three years of the shared prosperity fund.

The cut in funding of over £1 billion of EU funding to the Welsh Government has impacted on organisations and people on a national level and a regional level; for example, apprenticeships, further education, research and the major infrastructure of roads and railways. I know that for the last big infrastructure project on the A55 in north-west Wales, half of that was funded from EU funding—it was a £30 million project—and we say now, 'There's no money for road building'. On the funding for agriculture, I understand that £243 million has been lost from the EU for farm payments, and it will be sorely missed.

For new and previously EU-funded projects to be delivered on a regional level, a new layer of bureaucracy has been created, and it has been very difficult at times to get all local authorities on board, so that's created another issue at that level. Then there's the Multiply programme. I've heard that it's in direct competition with other programmes that are already available in Wales, but also that it's actually overfunded and local authorities are really struggling to get the money spent in time. So, they're asking whether it can be moved into another SPF element under people and skills—that would be really useful.

Overall, considerable work needs to be done in order for the UK Government's post-Brexit funding to be truly transformational. Funding for devolved competencies should come under the Welsh Government and the way it is spent scrutinised by the Senedd.

This is a really important topic, so I'd like to thank the Welsh Government for tabling this motion for us to discuss today. It's important as, for a start, it's about integrity in politics, honouring your promises and fulfilling your pledges. I'm sure we all remember the earnest entreaties about Wales receiving 'not a penny less' during the 2016 referendum. It is clear that this is a promise that has not been honoured or fulfilled by the UK Government.

In addition to highlighting a lack of integrity, this decision also has profound consequences—profound consequences for the money available to us here in this Welsh Parliament to fund the projects and infrastructure that are of such benefit to the people we represent. This is a topic that I have been able to repeatedly explore through the cross-party group on industrial communities, which I chair. I welcome the way the CPG has been able to contribute to the debate, respectfully working with colleagues from Westminster and Scotland in a way that the UK Government has signally failed to do, and, also, drawing on the expertise of groups such as the Industrial Communities Alliance. Their 'Six Principles for Streamlined Levelling-Up Funding', published around a year ago, is, perhaps, key here. It argues not only against an overall reduction in funding, but suggests additional money is needed from the UK Government to ensure communities do not lose out, with a ballpark three-year figure of £15 billion. It called for a process that encourages longer term financial commitments, with the removal of Treasury constraints that favour the short term. Funding should be strongly targeted, competitive bidding eliminated and rules simplified, and, critically, the devolution settlement must be respected fully.

Yes, we must ensure that Welsh councils are involved in how these schemes operate and in what is prioritised in their area, but that shouldn't be to the exclusion of the voice of devolved Parliaments. We know, and the motion recognises, that the creation and implementation of the shared prosperity fund has shortchanged Wales by £1.3 billion. Moreover, the SPF has proven to be smaller, less flexible and narrower in scope than the EU funding it is supposedly replacing. EU funding allowed for the adoption of a joined-up co-operative regional approach to policy making, particularly in the field of economic development. Instead, in its place, the UK Government has chosen to embed a dangerous and damaging Darwinian model of funding. The Institute for Government noted that councils, even before levelling up round 3, had wasted, through no fault of their own, at least £27 million on the bureaucratic act of preparing bids. To quote from the ICA's six principles, competitive bidding between local authorities is deeply wasteful of time and resources and not very good at delivering outcomes.

The Institute of Welsh Affairs and the Local Government Association have also criticised this aspect of the scheme's Hunger Games approach—

Would you give way?

—to public service delivery.

You refer to delivering outcomes. Are you aware that the three tranches of European funding that Wales received were only supposed to be temporary? It was only for areas of west Wales and the Valleys, including four north Wales councils, where GDP or prosperity per head was below three quarters of the EU average. And Wales only continued to get this temporary funding because, unlike other parts of Europe that received it, it didn't close that prosperity gap, it remained below 75 per cent in those west Wales and the Valleys areas, and because the Welsh Government instead used it as recurrent core funding rather than for the intended purpose.

Well, I'd say that that's a failure of the United Kingdom's unequal governance there. I would also point to the fact that my Constituency of Cynon Valley, which previously had relied on European structural funds as a lifeline, has not received a single penny from the UK Government's levelling-up fund. I think that speaks volumes.

But to go back to the argument that I was following, in terms of this Hunger Games approach to public service delivery, the outcome of this process is a situation whereby localised projects are favoured rather than those wide-scale transformative initiatives that this money could be used to support. It leads to a postcode lottery where certain opportunities are only available in certain areas and, crucially, a fragmented environment for business support and skills provision. That is just not good enough. The Welsh Government has been at the forefront in arguing that Wales can and should expect more. In particular, I want to thank the economy Minister who has championed this issue and tried to ensure that a more evidence-based collaborative approach is adopted. I know, when the Minister spoke to the cross-party group back in October 2022, reference was made to the Welsh Government seeking a process that embedded recognition of the Welsh index of multiple deprivation, for example.

Finally, I want to recognise the positive statement from Keir Starmer that a Labour Government in Westminster will restore the decision-making role for Wales on the replacement of structural funds. As Keir said when making the announcement, it's time for Wales to take back control.

I call on the Minister for Economy to reply to the debate.

Diolch, Dirprwy Lywydd. Can I thank Members who contributed to this debate today, and indeed have maintained scrutiny of this topic in recent years? I welcome the fact that there were a number of constructive contributions from across the Chamber. Looking ahead, I think one of the points that I'd just raise is, for example, the design and the delivery of the funds, not just the sum and the size of them, but actually how they're being delivered. And to pick up the point that Carolyn Thomas made on Multiply, it doesn't just cross over an area that is plainly devolved; because of its annual nature of funding, you can't design a rolling programme of activity, and it was deliberately designed in a way where it can't work alongside devolved programmes and Intervention. And that is much more likely to be a wasteful spend of public money, or, actually, the potential that money will simply be returned to the Treasury. That is not what levelling-up funds were supposed to do. 

As we wind those levelling-up schemes down towards the end of the year, it is vital to learn lessons from the failure to invest within the Welsh economy and not to work with us as meaningful partners in joint decision making. There are some areas where the Welsh and UK Governments could work together, where there is a crossover in what is devolved and what is not. Levelling-up funds are almost all entirely devolved. But, if you look at where we have managed to provide an area of constructive engagement, once we got over the shouting—and someone was mentioned who was demanding we accept a free port for £8 million as an annual sum—we actually got to the point where we had the same amount of money as English free ports, we had the same amount of money for investment zones in Wales. We managed to do that because of the way that we worked in this Government and we stood up for Wales in doing so. It was a pragmatic approach that actually ensured that Welsh priorities are now reflected in a jointly agreed statement for investment zones and free ports—what people are required to deliver against together, in a way that is consistent with our economic mission, that will contribute to our net-zero ambitions, will meet our duties in the future generations Act and, as I say, a parity of funding and, crucially, to promote fair work. You won't see that commitment in English free ports or investment zones.

However, it is undeniable that the UK Government choosing to bypass the Welsh Government and this Senedd with regional development funds combined with unmet funding promises creates significant gaps in investments in different regions of Wales. The most obvious example is what's happened with apprenticeship spend. That money simply isn't there any more. We don't have the additional tens of millions of pounds every year to maintain and protect the programme. If people think that money is there, I'd really be interested in understanding where that money should go from to move into that programme.

Would the Minister give way on that point?

I will.

He's making a very good point, but we shouldn't be thinking that it's just Labour Ministers making this point as well. Paul talked about grown-up Government earlier on and working between Governments within the UK, and it's a valid point, but what is a surprise is that the proposals by the UK Government that we've seen in the recent couple of years, post Brexit, have completely bypassed the Dunlop review, commissioned by the UK Government, which specifically said that when you deal with issues that nudge onto or are totally within devolved competence areas, you should work with the devolved Government to do it. There is the other question as well, Paul, I would say, and, Minister, I'd be grateful for your thoughts on this, as to the aspect of whether there is the competence and the networks in the UK Government, who haven't seen this scale of investment for a long, long time, that we actually have here established in Wales already.

It's one of the sadnesses that, in pragmatic terms, it's undone lots of that good work. It's gone back to a piecemeal approach, it's chosen deliberately not to work with the Welsh Government, to exclude us not just from making decisions about the funds, but, actually, when local authorities asked the UK Government if they could themselves put together an all-Wales programme, they were told they couldn't. That is what has happened in the choices about how the money has been spent. And yes, they have had to try and create an entire new network in areas they are not responsible for, rather than actually working with us, and that is a wasteful use of public resources; it is a wasteful disregard of the expertise that has been built up. He's too shy to say it, but these are lessons that Alun Davies learnt when he was formerly a Minister for European funding programmes, looking at the rather piecemeal approach to then get a more strategic approach for how we use the money, lessons this Senedd, including committees that Paul Davies took part in, urged us to learn in a further round of European funds that now have not come to Wales.

As Vikki Howells said, we were promised on the floor of this Chamber, and, indeed, outside, that Wales would not lose a single penny in replacement EU funds. We all know that simply isn't true. Wales now has significantly less say over less money. 

I'm hopeful that next year will bring a fresh opportunity to develop a better approach and better outcomes for our communities, one that is aligned with our ongoing work with the OECD on regional development in Wales, and a new framework for investment to be developed in partnership with our stakeholders. I look forward to a change at the UK Government that respects devolution, this Senedd and this Welsh Government and our mandate from the people who vote for us. As has been mentioned earlier, it is time that the powers and the money were restored to Wales, where they belong. We could achieve so much more and do so much more than the current levelling-up approach. I ask you to support the motion before us today.

The proposal is to agree Amendment 1. Does any Member object? [Objection.] Yes. I will therefore defer voting under this item until voting time.

Voting deferred until voting time.