Devolved assemblies receive boost to credibility

Wales and Scotland won significant increases in public spending - at roughly twice the rate of inflation - as the Chancellor sought to bolster the two devolved assemblies.

Wales and Scotland won significant increases in public spending - at roughly twice the rate of inflation - as the Chancellor sought to bolster the two devolved assemblies.

Mr Brown also made a special allocation to Wales to take account of its qualification for Objective 1 European aid, in effect abandoning the traditional cap on regional spending imposed by the Treasury under the Barnett Formula.

The Chancellor moved management of the European Social Fund in Wales, worth £149m over the next three years, to the Welsh Assembly. Its main Treasury allocation will increase year on year from £7.758m this year to £9.788m in 2003-04 - a rise of 5.4 per cent in real terms.

Paul Murphy, the Secretary of State for Wales, welcomed the measures as "an excellent settlement for Wales". It gave the Assembly "the resources to deliver better services and to increase prosperity for all the people of Wales in partnership with the UK Government".

In the past, the Treasuryinfuriated the UK's poorest regions by counting EU structural funds within its overall spending plans. But Dafydd Wigley, former leader of Plaid Cymru, claimed Mr Brown was still short-changing Wales by not passing on EU funds in full.

A similar policy change will affect Objective 1 spending for Cornwall, Merseyside and South Yorkshire and Objective 2 and 3 spending elsewhere, totalling £4.2bn in direct EU grants in the next two years.

Scotland's executive, which has greater freedom to decide its public spending than that of Wales, was given an average annual increase of 4.4 per cent in real terms. Mr Brown said this would take the Scottish Executive's spending from £15.05bn this year to £18.43bn in 2003-04, boosting its budgets by a total of £8.9bn over three years. The executive's spending plans will not be unveiled until September.

The rises were welcomed by John Reid, the Secretary of State for Scotland, as a chance for the Executive "to translate this opportunity into the best possible services for the Scottish people".

Jack McConnell, the Scottish Finance Minister, said the settlement in effect increased spending by 20 per cent in cash terms compared with when the Scottish Parliament was elected in May 1999. "That is a huge and significant boost for Scottish public services."

He said four key initiatives were planned: to improve schools and colleges; to invest £10m a year on local health projects; to double public transport investment to £60m a year by 2003-04; and to increase police numbers.

However, Alasdair Morgan, the Scottish National Party's Westminster spokesman, claimed Scotland had had a raw deal as the Barnett Formulagave England a spending rise of 6 per cent in effect.

The Northern Ireland Executive's budget will rise by £361m in 2001-02, £667m in 2002-03 and £988m in 2003-04.Extra unspecified spending has been provided over the next three years to the Northern Ireland Office to meet the Government's commitment to implementing the Good Friday Agreement reforms, the Treasury said.

Peter Mandelson, Northern Ireland Secretary, said the settlement was "excellent news".