Senedd unites to raise concerns over limitations on financial flexibility

A RARE cross-party consensus emerged as the Senedd united in raising concerns that some community councils have more financial flexibility than the Welsh Government

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Senedd members unanimously backed a motion calling on the UK Government to ease limits on the budget levers available to Welsh ministers.

Rebecca Evans, Wales’ finance minister, warned that the Welsh Government has faced significant financial constraints and uncertainty in managing its budget.

She said the Welsh Government’s reserve and borrowing limits remain the same as when they were set in 2016, hampering its ability to plan and respond to changing circumstances.

Ms Evans told MSs that reserve and borrowing limits will be worth almost a quarter less in real terms in 2024-25 than in 2018-19.

She called for limits on the amount that can be accessed from reserves in a given year – currently £125m for day-to-day spending and £50m for longer-term capital – to be abolished.

‘Autonomy’

The finance minister explained additional flexibility was provided to the Scottish Government in August, arguing the changes should equally apply in Wales.

Stressing it is a practical issue rather than a political one, Ms Evans added: “This motion is not about asking for more money from the UK Government.

“It’s about recognising the challenges that the Welsh Government faces due to the limited fiscal levers we have at our disposal.”

Adam Price, moving Plaid Cymru’s amendments, criticised the “deep financial injustice” of the Barnett formula, the mechanism used by the Treasury to calculate funding.

He also raised concerns about a lack of a periodic review of funding arrangements for Wales, calling for the creation of an independent parliamentary budget office.

‘Scant regard’

Peredur Owen Griffiths, who chairs the Senedd’s finance committee, warned that the UK Government shows scant regard to devolved budget processes.

The South Wales East MS called for the UK Treasury to ensure the dates of its autumn and spring statements take the Welsh context into account.

He criticised a lack of engagement from Whitehall departments, saying a string of chief secretaries to the Treasury have refused invitations to meet the committee.

Mr Owen Griffiths said: “I’m particularly heartened that there is cross-party recognition today that the current fiscal framework for Wales is simply not fit for purpose.

“If we want devolution to come of age and realise its potential, we must come together as one to demand a better and fairer deal for Wales.”

‘Insufficient’

Peter Fox, the Conservatives’ shadow finance minister, recognised the Welsh Government has limited levers, describing current arrangements as insufficient.

Mr Fox said while Wales’ reserve and borrowing limits have remained the same since 2016, the global economic outlook has changed drastically.

He said: “It is important that the Welsh Government has greater predictability and certainty regarding its spending and funding arrangements to support its budget planning.”

The former leader of Monmouthshire County Council added: “It seems peculiar that local authorities have more flexibility when it comes to borrowing and reserves ….

“The Welsh Government is responsible for far more powers, and far more people, than any individual local authority, so as such ought to have that greater flexibility.”

‘Nonsense’

Mike Hedges, a Labour backbencher who represents Swansea East, argued there is no good reason to limit movement into and out of Welsh reserves.

He said: “As far as the Treasury should be concerned, if it is spent or saved should not matter as it has already been given to the Welsh Government.

“Every council in Wales, including community councils, can move money into and out of reserves with no external control.

“The Welsh Government cannot. Does that make sense to anybody?”

Mr Hedges called for an independent appeals mechanism, allowing decisions such as the way HS2 has been classified as an England-and-Wales project to be challenged.

‘Judge and jury’

Alun Davies, a fellow Labour MS, agreed that the UK Treasury should not be judge and jury.

“That simply does not work and it works for none of us,” he said, describing the Treasury as a bully in London as much as Wales, Scotland or Northern Ireland.

Carolyn Thomas warned that limits on borrowing mean the Welsh Government has to turn to expensive alternatives such as the mutual investment model to build schools and hospitals.

Ms Thomas, a Labour MS for North Wales, said “Fundamentally, this is a debate about investment in our nation and its future.

“Borrowing for long-term infrastructure projects in health, education, public transport and housing is about putting in place the building blocks for a more prosperous society.”

The Welsh Government motion, which was co-submitted by the Tories, Plaid Cymru and Lib Dems, was agreed 51-0 after the debate on February 27. Plaid Cymru’s amendments fell.

 

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