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Tuesday, July 07, 2009

The cost of devolution

It is not often that an official government report endorses Liberal Democrat policy but today has been the exception.

The Welsh Government's Holtham Commission report on the way that the Assembly is funded was published earlier and concluded that Wales is losing out by £300m a year. The commission chair, economist Gerald Holtham, warned the underfunding could reach £8.5bn over the next decade, or £2,900 for everyone living in Wales.

The report concludes that a new funding formula is needed to reflect the actual cost of providing services for Wales. A further report on taxation and borrowing powers will follow next year. Mr Holtham said the Barnett formula, drawn up by the Labour government in the late 1970s, was "arbitrary" and in "urgent need of reform".

He wants a needs-based system which will take into account factors such as the age of the population and levels of poverty. That is very much in line with Welsh Liberal Democrat policy and the manifesto commitment of the Liberal Democrats at a Federal level at the last General Election to review the Barnett formula through a Federal Finance Commission.

As an interim measure, the report suggests the Treasury amend the Barnett formula to effectively freeze funding at the current level. This would, according to the commission, stop the money Wales receives being gradually eroded compared to England's funding.

The Finance Minister is expected to make a statement on this report next term. That gives him the whole summer to persuade the UK Government to take notice of the recommendations and offer some way forward on them.
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