Fair funding deal for Wales needs statutory footing, says National Assembly committee

Published 15/03/2016   |   Last Updated 15/03/2016

Wales needs a firm, long-lasting commitment on how it is funded in the future, according to a National Assembly for Wales committee.
The Finance Committee has concluded that the decision on the adjustment of Wales’s block grant - the money it receives from the UK Government each year - must be finalised before revenue raising powers through taxation are devolved. 
The Committee heard evidence that intergovernmental arrangements need to improve between Wales and Westminster and is concerned that, unless this happens, discussions on the block grant adjustment are likely to be late and may not result in the best possible outcome.
“It has been clear to us as a Committee during this and past inquiries that the relationship between Welsh Ministers and UK Government Ministers is not working as it should be and this needs to be addressed,” said Jocelyn Davies AM, Chair of the Finance Committee.”
The Committee has called for Wales to be funded on a needs-based model.
Jocelyn Davies continued:
“The issue of funding for Wales has been a bone of contention since the establishment of the now long-since discredited Barnett Formula.
“An agreement over a funding floor between the UK and Welsh governments is a positive step, but that deal expires in 2020 and we think it is critical that any agreement around funding for Wales is put at the top of the agenda.”
Economist Gerald Holtham acted as an expert adviser to the Committee during the course of the inquiry. He said:
“The evidence the Committee heard shows that some things have not changed since the Independent Commission on Funding and Finance for Wales, which I Chaired, reported back in 2010. 
“We called for a needs based formula for Wales then, and these calls are being repeated six years later in this report.
“It is clear with the changes to fiscal devolution that the need for an independent body to determine block-grant entitlements and adjudicate disputes is now more important than ever.”
The Committee makes 15 recommendations in its report (PDF, 457KB) including:

  • That an independent body is created to advise on a transparent system for the allocation of funding to the devolved governments, including independent assessment of how expenditure decisions for England feed into block grants;
  • That the distribution process for the block grant should have a firm statutory basis and not be a matter of ministerial discretion; and
  • That, as a minimum, there must be a principled decision taken on how the block grant will be reduced before taxes are devolved.

Report: Finance Committee - Future Funding for Wales (PDF, 457KB)

More information about the Finance Committee