The Barnett Formula

Wednesday 13th June

Question to Finance Minister

Mark Drakeford: What assessment has the Minister made of the consequences for the Welsh budget, were the Barnett formula to continue unreformed?

Jane Hutt: The Holtham commission produced compelling evidence that the Barnett formula leaves Wales underfunded in relation to its needs. In the absence of reform, this problem will persist and, over time, get worse.

Mark Drakeford: That is an interesting reply, Minister. Conventional wisdom has suggested that, at times of public expenditure cuts, the Barnett squeeze goes into reverse and the case for a Barnett floor is weakened. However, your final sentence suggests that that is not the case, and that the most recent analysis suggests that, even at a time of public expenditure restraint, Barnett convergence will continue. Is that the view of the Welsh Government? Is it a view shared by the Treasury? If it is shared, has the significance of that finding been strongly communicated to it? 

Jane Hutt: I certainly agree with the Member for Cardiff West’s question, and the point that he made about the urgency of securing the Barnett floor. Based on the evidence of the Holtham commission and other studies, such as that conducted by the House of Lords Barnett Formula Select Committee, it is clear that there is no case for further convergence in our relative funding. Our relative funding is already below the level that is necessary, given our relative needs. Even if there is only modest additional convergence in the next spending review period and in subsequent review periods, that would be completely unacceptable. An important development that I have shared with the Assembly is that Treasury and Welsh Government finance officials have agreed, acknowledged and come together in recognising the negative impact of convergence, so action is urgently needed.