By Paul Dicken
6 May 2010
The much-maligned Barnett Formula could offer some protection to the Welsh Assembly Government as it prepares for the most substantial spending cuts since devolution, Public Finance has learnt.
Alan Trench, a research fellow at Edinburgh University and expert in devolution, said: ‘Times are obviously going to be very tough, much tougher than anyone has let on.’
However, he added, the Barnett Formula could offer ‘modest protection’ for the Welsh block grant.
This is because a large proportion of the grant is made up of health and education spending, areas that Westminster has pledged to protect.
Last year, pressure grew for reform of the Barnett Formula, which dictates the level of spending for each of the devolved nations. Plaid Cymru has made this a central plank of its campaign by arguing that Wales should receive £300m more a year.
Trench questioned whether replacing the formula would lead to Plaid ‘finding themselves in the position of winning the argument but losing the money’.
Plaid Cymru economic adviser Eurfyl ap Gwilym told PF that the protected areas of health and education accounted for 60%–70% of the changes in the block grant. But this would only be a ‘marginal protection’ to Wales since other areas of spending were facing draconian cuts, he said.
Ap Gwilym also said there would be limited impact from the so-called ‘negative convergence’ of the Barnett Formula – the effect of not aligning Welsh spending with that of other UK regions – when public spending decreases.
At times of growth in public spending, the formula is designed to align spending per head across the UK.
He said: ‘When public spending growth in real terms is negative and inflation positive, as will be the case in the coming years, nominal changes are low and the negative convergence of the formula is minimal.
‘Next year, in the case of Wales, cuts in the £15.7bn budget will be approximately £27m lower than would otherwise be the case thanks to the convergence effect.’
But Ap Gwilym added that this was small compared with the expected cuts to the overall Welsh budget.
6 May 2010
The much-maligned Barnett Formula could offer some protection to the Welsh Assembly Government as it prepares for the most substantial spending cuts since devolution, Public Finance has learnt.
Alan Trench, a research fellow at Edinburgh University and expert in devolution, said: ‘Times are obviously going to be very tough, much tougher than anyone has let on.’
However, he added, the Barnett Formula could offer ‘modest protection’ for the Welsh block grant.
This is because a large proportion of the grant is made up of health and education spending, areas that Westminster has pledged to protect.
Last year, pressure grew for reform of the Barnett Formula, which dictates the level of spending for each of the devolved nations. Plaid Cymru has made this a central plank of its campaign by arguing that Wales should receive £300m more a year.
Trench questioned whether replacing the formula would lead to Plaid ‘finding themselves in the position of winning the argument but losing the money’.
Plaid Cymru economic adviser Eurfyl ap Gwilym told PF that the protected areas of health and education accounted for 60%–70% of the changes in the block grant. But this would only be a ‘marginal protection’ to Wales since other areas of spending were facing draconian cuts, he said.
Ap Gwilym also said there would be limited impact from the so-called ‘negative convergence’ of the Barnett Formula – the effect of not aligning Welsh spending with that of other UK regions – when public spending decreases.
At times of growth in public spending, the formula is designed to align spending per head across the UK.
He said: ‘When public spending growth in real terms is negative and inflation positive, as will be the case in the coming years, nominal changes are low and the negative convergence of the formula is minimal.
‘Next year, in the case of Wales, cuts in the £15.7bn budget will be approximately £27m lower than would otherwise be the case thanks to the convergence effect.’
But Ap Gwilym added that this was small compared with the expected cuts to the overall Welsh budget.
