Olympic Games sign death warrant for Barnett formula

The coming Olympic Games, to be held in London in 2012, have had the by-product of signing the death warrant for the Barnett formula which determines the way the Welsh Government is funded. This is the view of former First Minister Rhodri Morgan, set out at the weekend in a sparkling address to an Edinburgh conference on The Politics of Devolution.

It was an aside in a speech devoted to an overview of the working of devolution over the last ten years, but one that underlined the former First Minister’s conviction that the injustices of Wales’ funding in the wake of the Comprehensive Spending Review should be addressed as a priority.

The Treasury has adjudicated that spending on London’s transport, housing and other infrastructure needs caused by the Olympics, are for the benefit of the UK as a whole. Therefore they should not be calculated as a Barnett consequential in which the Welsh Government and the other devolved institutions would receive a commensurate spending increase. The loss to Wales is estimated at around £100 million.

Rhodri Morgan was scathing in his criticisms of the Treasury, which he said lived in a closed world along with the rest of the political class in London. He said the Holtham Commission, established by the Welsh Government to investigate the workings of the Barnett formula, had demonstrated beyond question its inadequacy. He declared that the report had proved a humiliation for the Treasury, which was, he said, “an incompetent mandarate that can’t do sums.”

Morgan added that it was bizarre that the London Coalition government had agreed to revisit the way Wales was funded but only if there was a Yes vote in the referendum on more powers for the Assembly next March. However, the two issues were entirely unconnected. “Commentators in Wales are baffled at why this connection has been made,” he said

Equally, if a reform went ahead the Coalition government was looking to give Wales a Welsh version of the Calman Commission’s recommendations for Scotland, which simply allowed the London and Scottish government’s to share a proportion of the tax base. Although this would increase accountability it would not address a fairer distribution of funds based on need. “What we want is the Holtham Commission’s proposals for change which would reflect Welsh needs,” Rhodri Morgan said, “Calman would give us the wrong base line.”

He illustrated this by pointing out that while Wales had 5 per cent of the UK population, it had 6 per cent of the needs but only 4 per cent of the income. Compared with Scotland Wales had a higher proportion of young people aged under 16 and a higher proportion of older people over 65, groups that both made relatively high demands on public expenditure. Combined there were 578 per thousand people of these groups in Wales, but only 522 in Scotland. Nevertheless, because the present Barnett distribution formula was crudely related only to population size, it gave Scotland more funding.

Speaking at Aberdeen University’s Irish-Scottish Forum, held in the Scottish Parliament in Edinburgh, Rhodri Morgan said he believed that while the Welsh people had broken through a psychological barrier in accepting devolution, the same could not be said of Westminster which was still reluctant to let go.

At the beginning of the devolution process in 1999 the Welsh people had low expectations, he said. But after ten years people were confident that Wales could make its own decisions without devolution descending into jobs for the boys and scandal. This was in contrast to attitudes in Whitehall where the attitude was one of contempt rather than respect. He cited the recent Comprehensive Spending Review in which Wales had got nothing except a Calman version of reform of Barnett, and then only if we vote yes in the referendum.”