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Friday, February 28, 2014

Fair funding for Wales

Unsurprisingly, the Welsh Affairs Committee report on the draft Wales Bill fails to achieve a consensus on key issues such as the lockstep linking together income tax levels in any devolution of income tax-varying powers and the voting system.

What it does do though is highlight the importance of reforming the Barnett formula so that the money going to the Welsh Government is distributed on the basis of need rather than an arbitrary population based percentage of UK spending set in the 1970s.

Fair funding is crucial before the Welsh Assembly takes on tax-varying powers, otherwise the calculation of the related claw-back of grant will be flawed and set the underfunding in stone for another generation.

The Western Mail report that the the Welsh Affairs select committee agrees. They argue that: “We believe that the issue of fair funding should be examined and do not see the need to postpone this until after the 2015 general election”:

The MPs state in their analysis of the UK Government’s Draft Wales Bill: “Although it is outside the scope of this inquiry, we have sympathy with the argument that the issue of fair funding should be resolved before income tax powers are devolved so that Wales is not unfairly disadvantaged.”

Committee chairman and Conservative Monmouth MP David Davies said: “If the power to collect certain taxes is devolved to Wales, the block grant will be reduced, and this must not unfairly disadvantage Wales, as the current funding formula does.”

I think it is universally agreed that nothing will happen to consider the fairness of the Barnett formula until after the Scottish referendum for obvious political reasons. However, it is my view that once that is out of the way, and irrespective of the result, the UK Government should announce an immediate review of the way that the nations and regions are funded with the aim of getting some objectivity and fairness into the system.
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