By Paul Dicken in Cardiff
08 July 2009
Wales stands to lose up to £8.5bn over the next ten years unless the Barnett Formula is reformed to take account of spending need, the Independent Commission on Funding and Finance for Wales has said in its first report.
The formula adjusts funding for the devolved nations on a per head basis in line with England’s spending changes. It is designed to ensure over time that the same will be spent per head in Wales as in England, regardless of relative need.
The commission’s report, published on July 7, called for the formula to be reformed to align the funding allocated to Wales with the country’s relative needs. ‘It appears unarguable that the level of public resources made available in Wales ought broadly to correspond to the relative need to spend on devolved activities,’ it said.
A lack of alignment to need was the ‘fundamental flaw’ of the formula created in the 1970s, with the gap increasing. The commission said any positive increments in the funding allocation should be multiplied by 114% to prevent further convergence in funding. The commission did not propose a replacement system at this stage, but made a range of recommendations.
These included giving more flexibility to the Assembly Government on capital and resource budgets, publishing an annual document on expenditure to increase transparency, and creating an independent advisory body to administer the technical operation of the formula.
The commission, known as the Holtham Commission after its chair, economist Gerald Holtham, was set up by the Welsh Assembly Government to examine the formula and possible alternative funding mechanisms. It will produce a second report next year looking at tax-varying and borrowing powers, as well as recommendations on funding arrangements.
08 July 2009
Wales stands to lose up to £8.5bn over the next ten years unless the Barnett Formula is reformed to take account of spending need, the Independent Commission on Funding and Finance for Wales has said in its first report.
The formula adjusts funding for the devolved nations on a per head basis in line with England’s spending changes. It is designed to ensure over time that the same will be spent per head in Wales as in England, regardless of relative need.
The commission’s report, published on July 7, called for the formula to be reformed to align the funding allocated to Wales with the country’s relative needs. ‘It appears unarguable that the level of public resources made available in Wales ought broadly to correspond to the relative need to spend on devolved activities,’ it said.
A lack of alignment to need was the ‘fundamental flaw’ of the formula created in the 1970s, with the gap increasing. The commission said any positive increments in the funding allocation should be multiplied by 114% to prevent further convergence in funding. The commission did not propose a replacement system at this stage, but made a range of recommendations.
These included giving more flexibility to the Assembly Government on capital and resource budgets, publishing an annual document on expenditure to increase transparency, and creating an independent advisory body to administer the technical operation of the formula.
The commission, known as the Holtham Commission after its chair, economist Gerald Holtham, was set up by the Welsh Assembly Government to examine the formula and possible alternative funding mechanisms. It will produce a second report next year looking at tax-varying and borrowing powers, as well as recommendations on funding arrangements.
