Welsh Government recalculates sum owed in HS2 consequentials to just £350m

Emily Price

The Welsh Government has recalculated the amount of money owed to Wales in HS2 consequentials at only £350m.

The UK Treasury previously classified the high speed rail project as an “England and Wales” scheme despite the fact it does not cross the border.

This means it did not trigger the Barnett Formula mechanism that would usually send money to the Welsh Government.

It has long been argued by all parties in the Senedd that Wales is owed billions from the UK Government.

Consequentials for HS2 have already been paid to the devolved administrations in Scotland and Northern Ireland using this formula.

Westminster has argued that Wales isn’t owed cash because Welsh people will benefit from improved journey times to London.

But when the Manchester leg of HS2 and its Crewe interchange were scrapped last year this justification was no longer acceptable.

Earlier this month, the Senedd voted unanimously to call for Wales to be given its fair share of funding.

But the Welsh Government’s new figure is hundreds of millions of pounds short of the £3.9bn sum previously calculated.

‘Correct figures’

During a debate in the Senedd on Wednesday (June 26), Cabinet Secretary for Finance, Constitution and Cabinet Office Rebecca Evans urged MSs to use the “correct figures” when making the case for Wales to receive its HS2 cash.

She said: “£350 million has been lost to Wales as a result of the misclassification of HS2. We’ll continue to press the UK Government – any UK Government – to reclassify HS2 as an England-only project and to provide us with our fair share of the consequential funding.”

Plaid Cymru MS Mabon ap Gwynfor asked the Cabinet Secretary to explain how she came to the £350m figure.

Ms Evans responded saying she had sent an “explainer” to colleagues on how much Wales had received from the UK Government in each of the financial years when HS2 has been under construction.

She said: “Wales must have its fair share of funding. But, equally, it’s important that we do use the correct figures, because they’re being used in this Chamber, but now also in the media, and I just think that that clarity is important.”

In March last year, Ms Evans called on the Chancellor of the Exchequer, Jeremy Hunt to provide Wales with its “£5 billion” share of HS2 funding.

She said: “The UK Government must commit to review the categorisation of this £100 billion investment as an England and Wales project and provide the Welsh Government with its £5 billion share of consequential funding.”

Last year, former First Minister Mark Drakeford said legal action was being considered over his government not receiving the additional cash.

But in April 2024, the Welsh Government confirmed it would not be pursuing the billions of pounds through the courts.

In the explainer sent to MSs sent last week, Ms Evans said it was “not possible” to say with any precision how much additional funding the Welsh Government should receive over the lifetime of the HS2 programme.

She said: “We can however estimate how the Welsh Government’s block grant would have changed to date, if HS2 had been classified as an England only programme. More precisely it is possible to calculate the additional funding the Welsh Government would have received since 2015 if it had comparability with HS2 in the Barnett formula. (HS2 was not separately identified in the comparability schedule at the time of the 2010 spending review or 2013 spending round, so there were no Barnett formula comparability issues before the 2015 spending review.)

“In aggregate the additional funding would have totalled around £350 million for years
up to 2024-25, including changes up to and including the March 2024 Budget.

“The additions arise because the Welsh Government would have had a higher comparability factor with the Department for Transport (DfT) at Spending Reviews. DfT has generally seen increases to its budget over the period, so higher comparability would have meant bigger positive consequentials for the Welsh Government’s block grant through the Barnett formula. The Welsh Government would also have received consequentials from changes outside spending reviews, including individual HS2-related allocations.”

A Welsh Government spokesperson added: “£350m reflects how the Welsh Government’s funding would have differed if HS2 had been deemed an England-only project in the Barnett formula since the 2015 Spending Review.

“It covers years up to and including 2024-25. It does not include any amounts in relation to future years, as those would depend on the future trajectory of UK Government spending plans.”

The new calculation comes less than a week before the nation finds out which party will be in power in Westminster.

Polling suggests Labour will win a landslide victory.

In a general election interview with S4C last week, Labours Shadow Welsh Secretary Jo Stevens claimed that HS2 doesn’t exist.

Asked whether Wales would get consequential funding from HS2 if a Labour government came into power, the senior politician said the project is “no longer in existence”.

She said: “We don’t know how much money has actually been spent – we don’t know what money is left – if there is money left.”

The current UK Government says the high speed rail project is at “peak construction”.

Wales loses £4.6bn of funding because the Tory UK Government says #HS2 is an England & Wales rail project🤷🏻‍♀️

The Tory Treasury says the Welsh economy will also suffer a £150m a year hit from HS2.

‘Levelling up’ will remain a empty Tory slogan unless the UK Government coughs up pic.twitter.com/6iffCfDSXq

— Jo Stevens (@JoStevensLabour) January 5, 2022

In 2022, Ms Stevens tweeted saying: “Wales loses £4.6bn of funding because the Tory UK Government says HS2 is an England & Wales rail project.

“‘Levelling up’ will remain a empty Tory slogan unless the UK Government coughs up.”