Is Labour getting Welsh rail funding back on track?

Ioan Phillips

During my time as a private secretary to the Secretary of State for Transport, I had the joy/poison chalice/grey hair-inducer (delete as appropriate) of the Rail and High Speed 2 (HS2) brief.

One aspect of my role involved handling correspondence. A decent amount, usually of Cambrian origin, enquired in rather negative terms about the status of HS2 as an England and Wales project.

Back in those days, the Labour Party at both ends of the M4 was incredibly vocal about how misguided this decision was. In 2022, the Shadow (and now) Welsh Secretary, Jo Stevens, declared: “Wales loses £4.6bn of funding because the Tory UK Government says HS2 is an England & Wales rail project.”

A year later, in 2023, the then-First Minister, Mark Drakeford, said that the Welsh Government was considering taking the UK Government to court to obtain this funding.

East West Rail

Following the news that East West Rail (EWR), which is a new line connecting Oxford and Cambridge, will also be classified as an England and Wales project, I decided to test the strength of Labour feeling about this.

I emailed the 27 Labour MPs in Wales and Labour’s 30 MSs, asking if they agreed with the classification of HS2 and EWR as England and Wales projects.

Special shout-outs go to Steve Witherden and Jenny Rathbone, who replied directly to my query, stating that they disagreed with the classification.

The Cabinet Secretary for Transport’s parliamentary office swiftly put me in touch with the Welsh Government’s press office, which provided the following response on behalf of Ken Skates in his capacity as a minister:

“This is not new. The system used for paying for rail improvements puts Wales and Borders within a wider network which has historically disadvantaged us. Previous governments have failed to change that, but the current UK Government has acknowledged that it shortchanges Wales.

“Past Ministers could have delivered a fair funding settlement, but failed to. Instead, they backed HS2 with no fair funding for Wales.

“In stark contrast, the present UK Government has admitted that the Wales and Borders network has been underfunded in the past. We have an agreed and ambitious pipeline of improvements that will make up for underinvestment by previous governments.

“We are also working together on exciting plans for rail reform that will further strengthen the Wales and Borders network.

“We are seeking a fair share of investment.”

Political 

I also obtained – unsurprisingly – a more political response from a Senedd Labour Group spokesperson, who said: “This is not new because rail is not devolved. Every week Plaid Cymru comes up with a different figure of how much Wales should get as a consequence of HS2 spending in England. Welsh Labour gets on with the job of negotiating fair funding for Welsh railways.

“For 14 years, the UK Tory Party continued a system that disadvantaged Wales. We now have a UK Labour Government that is listening and recognises that Welsh railways have been underfunded in the past.

“The First Minister Eluned Morgan, standing up for Wales, is pressing for a fair share of investment in Wales, as are Welsh Labour MPs and MSs.”

What do these replies tell us? There are three main dynamics of note.

First, Labour’s position remains that the historic balance of funding was unfair – but it believes that Wednesday’s Spending Review will help rectify this. The Cabinet Secretary for Transport has said he’s “confident” of a good outcome.

Second, and perhaps most significantly, Labour has moved away from talking about the imbalance in terms of precise figures (especially those in the billions). This shift was, however, happening before Labour’s 2024 UK general election victory. In June 2024, the then-Finance Secretary, Rebecca Evans, suggested Wales had missed out on “around £350 million” from HS2, marking a significant revision downwards from previous estimates.

Now it seems that Labour is playing the numbers game to portray Plaid as fiscal novices.

Third, even if the Spending Review meets with Mr Skates’ approval, this won’t halt calls for the devolution of rail funding from certain parts of the Labour Party (Lee Waters and Alun Davies are notably vocal about this.)

Judging by the noises from Whitehall, the prospect of devolved rail funding any time soon is an unlikely one, though.

Dynamics

These dynamics make it likely that rail will figure highly in next year’s Senedd election – especially since it serves as a neat way for each opposition party to analogise its critique of Labour.

For Plaid, it’s that, with Labour, Wales is going to keep kowtowing to Westminster; for the Welsh Conservatives, it’s that a Labour First Minister still has no clout with Sir Keir Starmer; and for the Welsh Liberal Democrats, it’s that Labour won’t touch the constitutional or fiscal architecture of devolution.

Ultimately, Welsh Labour is caught between a rock and a hard place on rail. The party can’t criticise its Westminster colleagues too much and risk expending political capital. Equally, the acknowledgement that the status quo isn’t working is driving calls for more radical change, which isn’t in its gift to give.

Either way, this situation is one that’ll be creating work for hard-pressed private secretaries, special advisers, and press officers in Cardiff Bay and Whitehall for a good while yet.