Plaid Cymru MP calls for Barnett formula review after Stormont deal

Plaid Cymru’s Treasury spokesperson, Ben Lake MP, has written to the Chancellor of the Exchequer calling for a review of the Barnett formula to ensure “fair funding for Wales”, after the commitment of a £3.3 billion funding package for Northern Ireland, including over £1 billion earmarked for supporting public services.

The Ceredigion MP pointed out that Welsh councils report a looming funding gap of up to £1.294 billion by 2026-2027, forcing them into a precarious position of cuts and council tax increases.

Plaid Cymru have requested that the Treasury urgently commits to providing an equivalent package of support to that offered to Northern Ireland to support county councils and public services in Wales. If such a package were to replicate the Northern Ireland offer per capita, public services in Wales would receive around £5.4 billion.

Review

Mr Lake said the outdated metrics used to determine funding allocation for Wales should be updated, particularly the Welsh funding floor set in 2018 based on data from the 2010 Holtham Commission, which relied on data from the 2001 census – 23 years ago.

He called for a review to assess replacing the Barnett formula with a “new system that moves away from ad-hoc funding of our public services and towards a framework which provides consistent, transparent, and fair funding for Wales”.

Last week (Wednesday 31 January) Plaid Cymru Westminster leader, Liz Saville Roberts MP urged the Secretary of State to “demand equivalent fair funding for Wales” in the House of Commons. The Secretary of State evaded the question.

In his letter, Mr Lake writes: “I warmly welcome the restoration of the devolved institutions at Stormont which will bring much needed stability for the people of Northern Ireland. I note that as part of this restoration, the Executive at Stormont will be receiving a funding package of more than £3.3 billion, including over £1 billion to support public services.

“As in Northern Ireland, public services in Wales need urgent financial support. Welsh councils report that they are facing a cumulative funding gap of up to £1.294 billion by 2026-2027. As a result of this shortfall, councils are having to consider large increases to local taxation in addition to significant cuts to the services they provide. Local authorities in England have also expressed concerns about a lack of funding.”

Outdated assessments

“I therefore write to request that the Treasury urgently commits to providing an equivalent package of support to that offered to Northern Ireland to support county councils and public services in Wales. If such a package were to replicate the Northern Ireland offer per capita, I understand that public services in Wales would receive around £5.4 billion.

“I also note that the package for Northern Ireland includes an uplift of 124% in Barnett Formula funding from 2024/2025. As you will be aware, this adjustment has been justified based on an assumed precedent of a Welsh funding floor of 115%. But this 115% is not based on Wales’ current level of assessed need, but rather on estimates made by the Holtham Commission in 2010 that drew from 2001 Census data. Since then, Wales’s needs and population have changed radically and urgently require review.

“Moreover, unlike the new financial settlement for Northern Ireland, even this outdated 115% estimate of Welsh needs does not actually trigger additional Barnett formula increments for Wales of 115%. Instead, Wales’ Barnett increments are set at just 105% for a ‘transitional period’ – a period which could feasibly last decades. Northern Ireland’s Barnett increments, in contrast, will be immediately boosted by the 124% ‘needs level’ set by Northern Ireland’s new funding floor.

Discrepancy

“Compounding this is a discrepancy over the true level of Wales’ funding relative to England. UK ministers frequently cite an ostensible level of 120% – an average figure over the SR21 period that is included in HM Treasury’s Block Grant Transparency report. Not only might this 120% be obsolete given of the well-documented effects of the Barnett squeeze, but HM Treasury’s December 2023 Country and Regional Analysis estimates total identifiable spending per person in Wales at just 114% of England’s level. 114% would of course fall beneath the 115% funding floor that should trigger the shift from the 105% to the 115% multiplier negotiated as part of Wales’ Fiscal Framework agreement.

“I also note that HM Treasury did not publish an update of relative funding alongside the July 2023 Block Grant Transparency Report.

“Given the shortfalls facing Welsh public services and the outdated data used for the Welsh funding floor, will the Government commit to conduct a review of the Barnett Formula and how it is currently implemented as part of Wales’ Fiscal Framework agreement, to assess whether it is truly meeting the needs of people in Wales?

“At the very least, the Government could provide updated figures of relative spending levels between England, Scotland, Wales and Northern Ireland, publishing fully transparent estimates of spending levels for each year (not as a multi-year average), and accounting for the enormous discrepancy in Wales’ relative funding levels in HM Treasury’s Block Grant Transparency report versus its Country and Regional Analysis report.

“As part of such a review, I would hope that the Government would fully assess replacing the Barnett Formula with a new system that moves away from ad-hoc funding of our public services and towards a framework which provides consistent, transparent, and fair funding for Wales and the other nations of the UK.”