Devolved Budget for Wales: Inflation

Baroness Wilcox of Newport Excerpts

Wednesday 15th March 2023 Lords Chamber

Asked by

[Baroness Wilcox of Newport]

To ask His Majesty’s Government what assessment they have made of the potential impact of inflation on the devolved budget for Wales.

[The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)]

The Welsh Government are well funded to meet their responsibilities. The 2021 spending review set the largest annual settlement in real terms since the devolution Act. The settlement is still growing in real terms over the spending review period. The Welsh Government also have their own tax and borrowing powers. In addition, the UK Government are supporting households UK-wide with the cost of living, supporting businesses, charities and the public sector with their energy bills.

[Baroness Wilcox of Newport (Lab)]

I thank the Minister for that Answer, but I need to make her and the House aware that Wales is facing a perfect storm of pressures, with austerity, the pandemic, the cost of living and high inflation. Our economy and public services in Wales are very fragile. Simply put, it seems that the UK Government have abandoned Wales to meet these pressures alone. With the funding from last autumn’s Budget Statement, inflation means that our settlement is still worth up to £3 billion less in real terms and £1 billion less next year. What can the people of Wales hope for from the UK Government’s latest Budget today—more of less?

[Baroness Penn (Con)]

My Lords, I reiterate to the noble Baroness—and to the Welsh Government—that the Welsh Government, in the 2021 spending review, received the largest annual settlement in real terms since the devolution Act. I also say to the noble Baroness that, with the inflation that we are facing across the country, the budget is still growing in real terms across the spending review period. The Autumn Statement included additional funding for Wales, and today’s Budget means that the Welsh Government will receive an additional £180 million through the Barnett formula across the next two years. Measures that we are taking across the UK in today’s Budget will benefit Wales: the extension of the energy price guarantee; the freezing of fuel duty; and the doubling of draught relief, which will support more than 2,000 pubs and bars in Wales. There is much to be welcomed in today’s Budget for Wales.

Wales: Additional Financial Resources

Baroness Wilcox of Newport Excerpts

Wednesday 18th January 2023 Lords Chamber

[Baroness Penn (Con)]

My Lords, I am aware of the views of Lord Barnett, to whom the formula’s name relates. The point my noble friend makes about needs is exactly what we tried to build into the fiscal framework in 2016. There was an assessment of additional needs in Wales. It said that, on a needs basis, it should be at least 15 % more than the equivalent in the UK. That was recommended by the independent Holtham commission, and that is something that the UK is taking forward.

[Baroness Wilcox of Newport (Lab)]

My Lords, while I would not wish necessarily to disagree with the Minister, I got my figures directly from the Welsh Government. Their overall budget this year, and in 2024-25, will be no higher in real terms than it was in 2022. Their capital budget will be 8.1% lower. With post-EU funding arrangements, Wales has been left with a £1.1 billion shortfall, and it is no longer able to fund three key areas: apprenticeships—Wales used to fund 5,000 apprenticeship places every year; practical support for those furthest from work through the communities for work scheme and ReAct for those in need of redundancy support; and higher education has been shut out of the levelling-up process, and hundreds of jobs are now at risk. Why is Wales being underfunded by the UK Government?

[Baroness Penn (Con)]

I have to disagree with the noble Baroness on most of the points in her question. As I have set out to this House, Wales receives 20% more funding per head than the UK equivalent, and that is over its needs-based assessment as recommended by the independent Holtham commission. The spending review set out the largest annual settlement in real terms since the devolution Act and the Welsh Government also have their own tax and borrowing powers. It is important that the Welsh Government are well funded, and that is what the Government have done.