Jonathan Brooks-Jones examines a key Welsh issue in the general election campaign
A key issue in this election has been the amount of funding Wales will get under the next government. How should the Westminster block grant that funds the National Assembly be calculated? The population-based Barnett formula has been used since it was established in 1979 by Lord Barnett (pictured), but now many are pushing for a change to needs-based assessment.
The report of the Welsh Government-appointed Holtham Commission, published last year, suggests that the ratio for devolved funding for England, Scotland and Wales ought to be: 100:105:115 – this would provide more funding for Wales than it currently receives, and less for Scotland. Under the current Barnett formula, England receives 85%, Scotland 10%, Wales 5% and Northern Ireland 2.87% of government money.
In their manifesto, Labour seem pleased with the Barnett formula, and rather pleased with themselves for the amount of funding Wales has received since they have been in power. According to the manifesto, and echoed by Peter Hain in the Welsh leaders debate last week, “Wales has done very well under the Barnett formula”. Hain said that funding for Wales has more than doubled, from £7 billion to £16 billion since they came into power 13 years ago.
Despite Labour’s claims, there is a good deal of debate about how much more Wales should receive. According to Plaid Cymru, who argue that needs-based assessment is required, Wales is currently losing out by £300million. Plaid leader Ieuan Wyn Jones has pledged that he and his party will push for what he called a £300m ‘Barnett floor’ to be installed, so that Wales’ funding never drops below that figure. The extra money will be used to protect frontline services in Wales during the period of spending cuts which will follow the general election.
The Conservatives agree with the Holtham commission’s recommendation of a needs-based assessment for Wales. The Conservative Shadow Secretary of State for Wales Cheryl Gillan confirmed this on the Welsh leaders debate last week. However, the Welsh Conservatives manifesto has no mention of the Holtham commission. Instead, it announces that they support the Calman Commission’s findings with regard to Scotland, and that there will be a referendum on increasing the powers of the National Assembly. The Calman commission focused on fiscal autonomy for Scotland, which does not apply to the Welsh debate and no party is talking about fiscal autonomy for Wales in this election. So why is it highlighted in the Welsh Conservatives’ manifesto?
In their manifesto the Welsh Liberal Democrats show how they would manage the expected cuts in Wales. They estimate the Welsh budget will receive £140 million in the 2010-11 financial year. The following two years would see a loss of £15 million each year, but then things would begin to pick up again with Wales receiving £30m in 2013-14, and £40 million in 2014-15.
The Liberal Democrats are unable to give an exact account of how much money Wales would receive after a reform of the Barnett formula, because their proposed Finance Commission of the Nations will take two or three years to complete it. They anticipate that the Finance Commission of the Nations would make use of the Holtham report’s suggestions (that is a needs-based assessment), and this would increase government funding in Wales. These additional funds are not be included in the costing of their manifesto, though they have said that extra money would be earmarked for education.
Instead of following the Holtham commission’s suggestion that Wales requires a needs-based assessment, Labour has decided to assess the out-turn of the Barnett formula for Wales on an annual basis. They are calling this an ‘historic reform’. They intend to stick with the old method, but augment it with an annual assessment. The question arises, what the criteria will be for the annual assessment. If Barnett is to be assessed against needs-based requirements, why not just use a needs-based formula in the first place? Labour seem keen to make Barnett work in future, rather than admit that Wales has lost out because it has remained in use for so long.
