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Wednesday, November 26, 2003

Funding Gap

Interesting report from the Institute of Welsh Affairs on how the Welsh Assembly is funded. At least two of the opposition parties in the Assembly, the Welsh Liberal Democrats and Plaid Cymru, have been arguing from the beginning that the Barnett formula, by which the devolved settlement in Wales is funded, is unfair as it does not reflect our needs. An article in the IWA publication, "Second Term Challenge" by Professor Iain McLean, who is a fellow of Nuffield College in Oxford, argues that London gets more government spending per head of population over devolved issues like education and health than Wales, despite the fact that the UK Capital City is richer. A "Needs Assessment" for the Treasury in 1979 showed that while Welsh spending per head was 6% above the English level, Welsh "needs" for spending on domestic services were 9% ahead. As Wales has got poorer since then in relation to England then this "needs" gap has got worse. Professor McLean has updated these figures. He has found that public spending on devolved services in Greater London was £3,431 per head in 2001 against £3,289 in Wales. But while Greater London had a GDP per head of £16,859, the equivalent figure in Wales was just £10,449. Because the Barnett formula is designed to secure a convergence of spend per head between Wales and England then this gap will widen still further as public spending increases.

This article is a devastating indictment of the inertia of successive governments and underlines more than any other work I have seen how much the 1998 devolution settlement was cobbled together by New Labour without any real thought as to how it would work. The fact is that despite increases in expenditure under successive Comprehensive Spending Reviews, Wales is already feeling the pinch. We are trying to pursue a distinct agenda to meet very real needs but do not have the resources to do that. Whether it is free bus travel for pensioners, the NHS, school class sizes, student support or housing, all of the budgets are being squeezed and are proving inadequate to the task. It is time that New Labour in the UK and Wales woke up and started to deal with this funding issue.

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