Wales politics

High Speed 2 extra funding for Wales, Treasury concedes

HS2 graphic
Image caption UK government ministers have always maintained that the project is of UK-wide significance

Wales will receive tens of millions of pounds in extra funding as a result of the High Speed 2 rail link, the Treasury has conceded.

It had initially rejected Finance Minister Jane Hutt's announcement that Wales would get extra cash stemming from spending on the project in 2015.

The Welsh government said it was "pleased the position is now clear".

But the spending commitment of around £35m in that year is not guaranteed for the lifetime of the project.

The Treasury suggested it may change the funding formula in the future.

HS2 is a controversial new high speed rail link proposed to run from London to Birmingham from 2026, with branches to Manchester and Leeds via Sheffield planned for 2033, at an estimated cost of £42.5bn.

UK government ministers have always maintained that the project is of UK-wide significance.

This would mean the devolved nations should not get extra payments which are normally due to them for transport projects in England.

The 2015 extra cash will put pressure on the Treasury to maintain the payments throughout the next decade - which could bring in up to £2bn for the Welsh budget.

'Very clear'

But the Chancellor is able to change the funding formula at his discretion, which means that in future years the system could be adjusted to exclude any additional cash for Wales.

The Welsh government is likely to campaign strongly to continue to receive the extra funding beyond 2015.

It confirmed it had received a share of £832m to be spent on the HS2 scheme by the Department for Transport in 2015-16.

Speaking to BBC Wales on Thursday, Finance Minister Jane Hutt said the Welsh government was "very clear" on the matter.

Image caption Jane Hutt said the Welsh government was 'very clear' on the matter

She said that this episode demonstrated how the way the Welsh government is funded "needs reform".

The Welsh government receives a slice of the extra money that is spent in England on services that are devolved in Wales, such as health or education, what is known as "Barnett consequentials".

That process would normally include transport spending, but Treasury officials had always maintained Wales would not get more cash as a result of extra spending on HS2 because they say the project benefits the entire UK.

Political wrangle

The issue of Wales receiving part of this money has been at the centre of a bitter political wrangle in recent years.

Ms Hutt's statement to the assembly's finance committee on Monday - where she informed members of the extra cash coming to Wales - was welcomed as a breakthrough by campaigners from across the political spectrum.

She told AMs there would be £84m extra in 2015-16, because of a £2bn increase in the Department for Transport's overall budget, which includes £832m spent on HS2.

A Treasury spokesperson said the Welsh government had received a "capital consequential" of £84.5m.

"This was based on a £2bn increase in the total Department for Transport capital budget," said the Treasury.

Figures obtained by the BBC under a freedom of information request showed that Cardiff could potentially lose £70m in economic output once a high speed rail link opened between London and the north of England.

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