Gov't spending in Wales

This post follows discussion at my 'community meeting' in Berriew last night. It's not researched, so may be 'best guess' in places. Am willing to amend if I have anything wrong. It's a post for those who are not expert in public sector finance - which is almost everyone!!

Let's begin with the Barnett Formula. Most people have heard the term, but know not what it is. In 1978, Joel Barnett was the Treasury Minister responsible for allocating public spending across the four nations of what was then a non-devolved UK. The Formula was based on the then populations of the four nations of the UK. It was meant to apply only for a short period - but its still going strong 38 yrs later!. Lord Barnett himself has dismissed the formula attached to his name as unfair, especially to English regions.

A more fair and sensible way for the Treasury to allocate state spending would be on the basis of relative need - and the needs of Wales, Scotland and N Ireland are higher than England. Very difficult and contentious to do though. The reality over many years has been that both Scotland and N Ireland have received more than what's been fair, and Wales less. We do not know by how much Wales has been losing out, but a few years ago, respected Welsh economist Gerry Holtham calculated it at around £300 million per annum - not a hugely significant figure in the greater scheme of things. A generally misunderstood way the formula works (and because of what services are devolved) the 'underfunding' figure has reduced as total UK public spending has decreased over recent years. At present Wales received about £115 for every £100 spent in England, which about matches Wales' needs. First time for decades this has been the case. There is now no gap between the comparative needs figure for Wales and the actual budget. There is now no longer a Barnett 'deficit'.

Which is why the recent Treasury commitment to a ' Barnett Floor' matters. It's a Treasury commitment to maintain the Welsh 'block grant' to Wales at the current level (or higher) for the next 4yrs. It also means a commitment beyond 4 yrs will be a significant manifesto issue at the 2020 General Election. I cannot see any party in 2020 not committing to maintaining this new 'fair' level of Welsh public spending. Wales should receive it's fair level of Gov't funding from the Treasury into the future. It seems that for the first time since Lord Joel Barnett was Chief Secretary to the Treasury in 1978, Wales is treated fairly.