Time for UK Labour to come clean about its regional aid intentions

Martin Shipton

The idea that the election of a Labour government at Westminster would, as suggested by Welsh Labour during last year’s general election campaign, herald a new era of frictionless collaboration was always a pipe dream.

That could only work if the administration in Cardiff was wholly subservient to Westminster.

Some would argue that’s how things are, but the truth is more nuanced. It’s certainly the case that Labour MSs have been prepared to swallow more regressive policy decisions from Keir Starmer than from the multiple Tory prime ministers who preceded him, but so far they have – at least in theory – maintained their call for HS2 and Crown Estate funding justice.

Eluned Morgan says she hassles Starmer over HS2 funding every time she sees him. So far, the hassling hasn’t worked, but we live in hope.

To his credit, Mark Drakeford in his current guise as the Finance Secretary published a few days ago detailed workings-out that showed how Wales had already lost £431m in unpaid Barnett consequential payments.

Throughout his period as First Minister (2000-09), Rhodri Morgan had what he never described as the luxury of a Labour government in Westminster to deal with. Funding, as now, was the major issue of the time.

Morgan took the job after his predecessor Alun Michael was unable to obtain match funding from the Labour government in Westminster for Wales’ EU aid programme. I obtained under the Freedom of Information Act the correspondence in which Michael begged Andrew Smith, then the Chief Secretary to the Treasury, to get him out of a political hole by coughing up the money.

Uncomradely behaviour

In an act of uncomradely behaviour, Smith refused and threw Michael to the wolves. So much for two Labour governments working together.

Another example was the Labour UK government’s refusal to replace the Barnett formula with a more needs-based measurement of how much the devolved administrations should get from the Treasury.

Rhodri Morgan told me quite openly that with Gordon Brown – a Scottish MP – as Chancellor, there was no way the Barnett formula – which is used to calculate how much cash is allocated to the devolved governments by the Treasury – would be ditched.

While Wales would have got more money from a needs-based formula, Scotland did very well out of Barnett and Gordon Brown wouldn’t want to hand the SNP a cause to exploit.

As it happens, neither did Brown’s successors, whether Labour or Tory.

More than 20 years later, we’re in the midst of another funding crisis. While Welsh Labour is doing its best to persuade us that we’re benefitting from a cash bonanza thanks to funding increases from Westminster, many are finding that difficult to reconcile with higher utility prices, increased council tax bills, public service cuts, cancelled winter fuel allowances, a rejection of compensation for WASPI women and the sense that we’re trapped in an age of continuing austerity.

Top-level European aid

We need more money in the system, not less. When we were in the EU we knew where we stood. For three successive seven-year rounds, a region comprising most of Wales called West Wales and the Valleys was entitled to top-level European aid funding. It qualified because the region – whose boundaries were carefully drawn up by civil servants to ensure its application was successful – had a Gross Value Added per head (a variation on GDP per head) less than 75% of the EU average.

When we left the EU, we were into far less certain territory. Decisions about which areas to fund were not based on an unimpeachable mathematical formula, but on the whim of officials in a UK Government Department.

Local authorities were forced to bid against each other for funds, with no guarantee that those most in need of help would succeed. Pork barrel politics – a form of political corruption, after all – was in the frame, and the Welsh Government was excluded from the process.

Welsh Labour politicians at Westminster were in the vanguard of opposition to the new system, vowing a return to the tried and trusted ways of EU-style funding allocations when Labour returned to power at Westminster.

Eight months after Keir Starmer became Prime Minister following a landslide victory in last July’s general election, we are still waiting to find out what his government’s blueprint for post-Brexit regional aid distribution will be. Will there be a mathematical formula, or will pork barrel politics hold sway? And given Chancellor Rachel Reeves’ insistence on keeping to strict spending rules, how much will be in the pot anyway?

At present we just don’t know – and we should.

Lack of clarity

Llinos Medi, the Plaid Cymru MP for Ynys Môn and her party’s Westminster spokesperson on Housing, Communities and Local Government, told me: “The ongoing lack of clarity about the replacement for the Shared Prosperity Fund is deeply frustrating. I have repeatedly asked for clarity from the UK Government, yet Wales is still left in the dark about future funding.

“Rachel Reeves’ recent ‘plan for growth’ revealed a continuing pattern of concentrating funding in the South East of England, so I am afraid that there is little interest from this Labour UK Government in tackling regional inequalities.

“We need a clear framework – similar to the one we had as members of the EU – setting criteria for deprivation so that areas, many of them in Wales, which have been underfunded by Westminster, receive the funding they need.”

Meanwhile, at a local level, most people in Wales will be getting council tax demands well in excess of inflation.

The other day Cllr Alun Lenny, the cabinet member for resources at Plaid-controlled Carmarthenshire County Council, told councillors: “A week ago, we voted for a council tax increase of 8.9%. That would have been 5.4%, had it not been for the increase in employers’ National Insurance contributions, announced by the Chancellor in her Budget, which comes into force next month.

“Like all other public services, we’ve been promised government funding to cover the extra NIC cost for directly employed staff, but not for those under contract. As a result, the council faces an estimated extra cost of £3.5m, which equates to 3.5% on the council tax.”

‘Change for the worse’

I spoke to Cllr Lenny, who told me: “When Keir Starmer talked about ‘change’, I didn’t think he meant change for the worse, but that’s what it is in terms of the council budget. It’s been much more difficult this year than in the last two years.”

I also spoke to Cllr Deryk Cundy, who leads the Labour group on Carmarthenshire council. He believes Plaid is exaggerating the impact of the NIC increase, and says that contracted staff in the care sector should be brought in-house.

That’s easier said than done, and doesn’t help in the short-term.

Ever since political devolution was introduced more than 25 years ago, there have been innumerable debates, conferences and inquiries into the centralisation of economic power in London and the south east of England. Virtually nothing has been done to change that, despite all the talk.

Let’s hope that as a first step we can look forward to a clear statement from the UK Labour government on the future of regional aid policy – and how it will be put on a firm basis designed to be transformational. We deserve nothing less.