UK Treasury funding formula for Wales 'opaque', say MPs

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First Minister Mark Drakeford
Image caption,
First Minister Mark Drakeford says the current funding formula is "well, well past its sell by date"

The way funding for the governments in Wales, Scotland and Northern Ireland is decided is "complicated" and "opaque", according to a group of MPs.

The Commons Public Accounts Committee (PAC) calls for greater transparency and scrutiny over the funding.

Wales' First Minister Mark Drakeford said "without a clear rule book, devolved administrations are always at the mercy of manoeuvring" at Whitehall.

The Treasury said it would consider the report's findings.

The report concludes:

  • Arrangements for funding the devolved administrations are "increasingly complex and there is a lack of transparency about how funding decisions are made"
  • Ministers' ability to allocate funding outside of the Barnett formula without consequential payments to other nations "makes it impossible to determine whether funding decisions are based on need"
  • The Treasury "does not know whether the block grant funding it allocates to the nations adequately reflects the needs of citizens across the UK"
  • The Treasury's decisions about how to finance the UK government's spending plans "affect the funding allocated to the devolved administrations and their ability to plan and manage their finances"

Committee members also expressed concern over "the uncertainty for devolved administrations caused by the UK government's postponement of the Spending Review and the absence of a decision on how it will replace existing EU funding".

The Barnett formula dictates the level of public spending in Northern Ireland, Scotland and Wales, allocating funding based on population size and the powers devolved to them.

Cash is determined on whether the UK government increases or decreases funding for departments that cover areas that are devolved.

It is named after its inventor, former Labour chief secretary to the treasury Joel Barnett, but has proved controversial and has been deemed to have underfunded Wales over the years.

Recently a new funding framework between the Welsh and UK governments, which does not replace Barnett, added new protections for Welsh funding.

Public Spending per head 2017-18

  • Northern Ireland - £11,190
  • Scotland £10,881
  • Wales at £10,397
  • England £9,080

Mr Drakeford told BBC Wales: "I very much welcome the PAC report. It says very much of the things that we have said over a number of years.

"The Barnett formula is well, well past its sell by date, it needs to be replaced by something that is genuinely needs-based. The report refers to the fiscal agreement that we concluded with the UK government that moves us a small way down that path as an example of the direction we need to go in.

"But it also points to the way in which, without a clear rule book, devolved administrations are always at the mercy of manoeuvring at the Whitehall end."

Image source, Reuters
Image caption,
The UK Treasury still provides most of the Welsh Government's budget

Mr Drakeford cited the example of teachers' pay - School teachers are set to get a pay increase of 2.75% in Wales,

He said: "The department in England is saying that it will find all the money it needs to fund teachers' pay just from bits of money it can collect from around the room inside its own budget, and that is millions and millions of pounds.

"And if they do it that way that avoids the need to give any money to Wales and to Scotland to deal with teachers' pay here and north of the border. That is absolutely unfair, it's definitely not the way the system is intended to operate."

He added: "It's that sort of manoeuvres that this report highlights and says we have to have a fairer way, a more open and transparent way, so that Whitehall cannot operate in that way in the future."

'Largest settlement'

A Treasury spokesman said: "We will consider the findings of this report.

"We are very transparent about the amount of funding we provide for the devolved administrations - all changes to their block grants are set out in our annual Block Grant Transparency publication."

Welsh Conservative finance spokesman, Nick Ramsay, said: "We have acknowledged that the Barnett Formula is nearing the end of its life, but we should also recognise that the fiscal framework, which was jointly negotiated between the Welsh and UK governments, goes a long way to providing fairer funding for Wales, and now sees Wales in charge of its largest settlement ever."