The Welsh Goverment was seeking support for motion calling on the UK Goverment to provide fairer funding mechanism
The Senedd chamber.
Senedd Members have narrowly rejected a Welsh Government bid to reform the way Wales receives money from Westminster.
A motion calling for “fair funding for Wales”, put forward by Welsh Government Trefnydd Heledd Fychan, was beaten by 46 votes to 45. The motion called on MSs to back the Welsh Government as it seeks changes to the Barnett Formula.
The Barnett Formula is used by the UK Treasury to calculate changes in the funding provided to the devolved administrations in Wales, Scotland, and Northern Ireland.
According to the Institute for Government, the Barnett Formula “calculates devolved budgets by using the previous year’s block grant as a starting point (or ‘baseline’), and then adjusts it based on increases or decreases in ‘comparable’ spending per person in England, meaning spending by the UK government on services in England that are devolved to one or more of the other nations.
“Changes to the devolved block grants are calculated by multiplying the change in spending by UK government departments by the comparability factor and the population proportion of each nation.”
Though initially intended to be used as a temporary solution for determining funding allocations between the UK nations, the formula has remained in used since its introduction in 1979. Each of the opposition parties tabled an amendment to the motion.
Labour’s amendment called to delete all of the Plaid Cymru motion and instead recognise “that redistribution of wealth is a major benefit of being part of the United Kingdom”.
It also stated that Scottish resistance to Barnett formula reform should be the “primary focus” in the Welsh Government’s engagement with the Scottish Government.
Reform’s amendment similarly proposed to delete the entirety of the Plaid Cymru motion and called for the Welsh Government to focus spending on devolved areas, noting that, according to analysis from the Institute for Fiscal Studies, reforming the Barnett formula could result in Wales receiving £1 billion less a year.
It also called on the UK Government to cut international spending to deliver fairer funding for Wales.
The Conservative amendment meanwhile called on the Welsh Government to use its existing budgets to deliver “better value for money for Welsh taxpayers”. It also noted the work of previous Conservative UK governments, including the 2016 introduction of a “need-based factor into the funding formula for Wales”. First Minister Rhun ap Iorwerth told the Siambr that fair funding for Wales is “more than just politics or political party rhetoric”.
He said: “It relates to Wales, which has the tools in its hands to build a better future for ourselves.
“The current fiscal arrangements in the United Kingdom aren’t just unfair to Wales, they make economic failure more likely, and through reforming the current system we will ensure that the Welsh Government has the resources and the powers… to invest in public services, in infrastructure and in economic growth.”
Mr ap Iorwerth vowed to work “constructively” with the UK Government, noting Andy Burnham – the likely next Prime Minister – has experience of devolution from his time as Mayor of Manchester.
He urged Labour MSs to vote for his party’s motion, noting their manifesto committed to fair funding.
Taking an intervention shortly before closing his speech, the First Minister was questioned by Tory MS Andrew RT Davies on whether he had reached out to opposition parties to find a consensus.
Noting the “simplicity” of the Plaid Cymru motion, Mr ap Iorwerth said it was “worrying” that Mr Davies believes it is something consensus needs to be found on.
He said: “This is the fundamental of what we are here as a Senedd to do. This is the fundamental of us being able to speak with one voice as a nation.”
Concluding, the First Minister added: “This Senedd has voted unanimously in favour of fairer funding for Wales before.
“It’s my sincere hope that we can do so once more today, in the interest of the wellbeing and prosperity of our people.
“And this is bringing to the Senedd that pursuit of consensus right here in our national parliament today..”
Caerdydd Penarth MS Huw Thomas spoke of Welsh Labour’s belief that Wales “benefits from being part of a union”.
Describing Wales and the UK as “stronger together”, Mr Thomas said: “The Welsh Government continues to receive over 20% more per person than equivalent UK Government spending in the rest of the UK.
“That means that, for every £1 spent by the UK Government in devolved policy areas, the Welsh Government is able to spend at least £1.20 on devolved priorities like health and education.
“On the most basic level, this is redistributive. It brings a material benefit to public services and communities in Wales and I would urge those members, who cheerfully advocate leaving such an arrangement by exiting the United Kingdom, to consider those impacts extremely carefully.”
Acknowledging the Barnett Formula is not “perfect”, the Labour finance spokesperson said reforming it requires negotiation between all four nations.
He said: “Fundamentally reforming the Barnett formula in favour of a needs-based system will require negotiation, and ultimately agreement between all four nations. No single nation can do this alone, and yet, that agreement between nations is not forthcoming”.
Mr Thomas, the former leader of Cardiff Council, said the Scottish Government “stops short” of calling for a needs based system because “the current system benefits Scotland further”.
Quoting the Institute for Fiscal Studies, he said: “’No needs-based factor has been introduced for Scotland, likely reflecting the fact that it currently receives more funding per person than Wales, despite assessments suggesting it has lower needs’.” Reform’s Welsh leader Dan Thomas described the debate as more about “Plaid’s unfunded manifesto” than securing fair funding.
He said: “The First Minister is taking his begging bowl to London not because Wales doesn’t get enough funding, but because Plaid, in my opinion, misled voters when they said that their manifesto was fully costed.”
Similarly to Welsh Labour, the Casnewydd Islwyn MS said Plaid Cymru’s first step in calling for changes to the funding formula should be to “align with their sister nationalist party”.
But the opposition leader said the Welsh Government confirmed to him in writing that no discussions have yet been held with the Scottish Government.
He told the government it should “turn their attention” instead to the “huge amount of waste within the Welsh public sector”.
Mr Thomas, a former leader of Barnet Council in London, said: “Standing up for Wales is not about taking a begging bowl to London, asking for more money when we already receive more than England.”
He called on the Welsh Government to make “solid business cases” for investment in Wales, to focus on the M4 relief road and A45 upgrades, and to seek private sector and UK Government money to build houses in Wales.
He added: “Make no mistake, Reform is in favour of making the case for capital investment above and beyond our block grant.
But we need to do some of the heavy lifting ourselves, and we need to be much more ambitious. “So, it’s time to end the blame, the excuses, the platitudes, the begging. Let’s stand up for Wales by taking action and taking our ambition to another level.”
Welsh Conservative leader Darren Millar described the Barnett Formula as “beyond its shelf life” and “out of date”.
He said there is a need for a new funding mechanism for the UK, but said the “big issue” with the fair funding debate is there is “always a risk” when asking for a review of the funding arrangements.
Mr Millar also criticised what he described as the “political game” played by Plaid Cymru where “it has lots of disagreements with the government down the other end of the M4”. Responding to the debate, Mr ap Iorwerth said: “There’s a straightforward question at the heart of this debate. Should we always seek to stand up for Wales and stand up for fairness? […] Or do you believe Westminster is being generous to Wales and we should be grateful for what we get?
“That is clearly Reform’s position. To seek fairness for Wales is to hand out a begging bowl. That is their level of respect for Wales.
“They are happy for Wales to languish. Pitching people against each other is what they do, creating divisions within our communities that deepen the challenges that face us as a nation, and blaming some of the most vulnerable people, rather than being willing to stand up against the deep inequalities within the UK.”
Mr ap Iorwerth also criticised Labour’s position on the debate, describing it as a “remarkable” shift in tone.
Addressing calls for the Welsh Government to tackle Scottish resistance to reforming the Barnett Formula, the First Minister said: “It is not the position of Welsh Government versus Scottish Government that is important here.”
He continued: “It is not Scottish Government that will block the devolution of rail or will block the devolution of the Crown Estate, which is essential to bringing about fair funding for Wales.
“It is not Scottish Government that is blocking Wales from being able to get the consequentials of HS2 that can transform our infrastructure and lead to the improvement in Welsh productivity that we should all strive for.”
Mr ap Iorwerth stressed the need for a “fair” and “transparent” funding system reflecting Welsh needs.
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