Assembly debates Holtham Report findings
15 Oct 2009
Welsh AMs have voiced their support for the recommendations of an independent report, which recommends changes to the way in which funding is allocated by the Treasury to the Welsh Assembly.
During a debate on the report of the Holtham Commission in the Assembly Chamber on 14th October, AMs voiced their agreement with the report’s findings that the current funding formula needs to change.
The Independent Commission on Funding and Finance for Wales, chaired by economist Gerald Holtham, was established to undertake a study of the Assembly’s funding arrangements, as well as tax-varying and borrowing powers. This report, the Commission’s first, focuses on the current funding formula: a further report on tax-varying and borrowing powers is expected to follow in 2010.
Under the current arrangements, the UK Treasury allocates funding to the Assembly, which is in turn adjusted according to the Barnett formula. Under the Barnett formula, any increase or decrease in the expenditure per population in England, will be distributed across the other UK countries, in proportion with population. The formula is therefore based upon expenditure per head, rather than according to the needs of devolved administrations, and funds allocated according to the formula do not take into account existing expenditure. The formula is controversial in relation Wales because on its continued application, expenditure per head in Wales, which is currently higher in Wales than in England, will result in a convergence of expenditure per head between England and Wales, the so-called "Barnett squeeze", regardless of any differing needs experienced in Wales. The Barnett formula has been criticised by the House of Lords Barnett Formula Select Committee, the Commission on Scottish Devoution and the House of Commons Justice Committee, who have all called for reform of the current system.
The Holtham report, published in July, has recommended that a new formula based on relative need should be agreed between the UK Government and devolved administrations, with the details of the new system to be set out in a Ministerial concordat approved jointly by Welsh ministers and the UK Government. As this will take time, the report recommends that the current convergence of expenditure between England and Wales should be halted by an adjustment to the current funding calculation. The report also recommends that the Assembly should be given greater flexibility in the way it uses funds allocated to it, including, amongst other things, the ability to switch funds from capital resource budgets.
The Commission has gone even further however, by recommending that the administration of the technical aspects of the new formula should be carried out by a body at arm’s length with the Treasury and the Assembly Government and that statistics which support the calculation of funding levels should be published. The report also recommends that a Treasury Minister should be invited to meet the Assembly’s Finance Committee to discuss the resources available to Wales as a means of increasing transparency.
Whilst there is widespread support for the Holtham Commission’s recommendations, the detail of how such a new system might work, remains to be seen.
Click here to view the Holtham Commission’s report
Click here for a link to the Assembly’s bilingual Record of Proceedings to read the text of the assembly debate
