Lord Wigley
To ask His Majesty’s Government what representations they have received from the Welsh Government concerning the Barnett Formula to fund public services in Wales.
The Financial Secretary to the Treasury (Lord Livermore) (Lab)
My Lords, the Chief Secretary to the Treasury is in regular contact with his Welsh Government counterparts on funding, including the application of the Barnett formula. He spoke to the Cabinet Secretary for Finance on the morning of the Budget. As a result of the Barnett formula, the Welsh Government are receiving at least 20% more funding per person than equivalent UK government spending in England; that translates to over £4 billion more in 2025-26. The Budget delivered the largest real-terms funding settlement to the Welsh Government since devolution.
Lord Wigley (PC)
My Lords, is the Minister aware that Wales’s Finance Minister, Mark Drakeford, wrote to the Chancellor of the Exchequer ahead of the Budget last week, asking for a review of the Barnett formula, specifically Wales’s comparability factor for transport funding, which has fallen from 80% in 2015 to 36% in 2021 and, following last week’s Budget, is now down to 33%? What recent discussions have the UK Government had with the Welsh Government regarding this? Can the Minister explain why the Welsh Labour Minister’s pleas for fairness in this matter have been ignored, and when will the Government do something about it?
Lord Livermore (Lab)
I am grateful to the noble Lord for his question. The Welsh Government settlement for 2025-26 is the largest in real terms of any since devolution. The Welsh Government are receiving £21 billion in 2025-26, including an additional £1.7 billion for the operation of the Barnett formula, with £1.5 billion resource spending and £250 million in capital. On the noble Lord’s second question, the Chief Secretary has a very good working relationship with the Welsh Government’s Cabinet Secretary for Finance and spoke to him on the morning of the Budget. The Chief Secretary also met the devolved government Finance Ministers in person on 3 October for the most recent finance Interministerial Standing Committee.
Baroness Wilcox of Newport (Lab)
My Lords, the Minister in the Welsh Government said after the Budget:
“It is clear the Chancellor is listening to what Wales needs. I look forward to working with the UK Government on our other priorities”.
Can my noble friend confirm the strength of that renewed working relationship after what we have experienced for the past 14 years?
Lord Livermore (Lab)
I am grateful for my noble friend’s question; it is gratifying to hear what she says. As I said, the Welsh Government settlement for 2025-26 is the largest in real terms since devolution, and Treasury Ministers are in regular and constant contact with their counterparts in Wales and the other devolved Administrations.
Lord Davies of Gower (Con)
My Lords, the Budget delivered an additional £1.7 billion for Wales, and the Barnett formula means that Wales gets £1.20 of public funding for every pound spent in England. In light of this, can the Minister explain why the Labour-run Welsh NHS has waiting lists at record highs, with 22,000 people awaiting operations for over two years?
Lord Livermore (Lab)
The Barnett formula is a simple and efficient way of allocating finance and has stood the test of time. As the noble Lord says, it delivers a very good deal for Wales; the higher per-person funding broadly reflects the higher cost of delivering public services in Scotland, Wales and Northern Ireland compared with England.
Baroness Humphreys (LD)
My Lords, the Barnett formula has been in existence since the 1970s, when it was introduced as a temporary measure, and has since been discredited, even by Lord Barnett himself. Does the Minister agree that the formula needs to be reformed and replaced by a new, needs-based formula that meets the new and changing demands on the devolved nations in the 21st century?
Lord Livermore (Lab)
No, I do not think I agree, and I am not sure that the formula that the noble Baroness sets out would deliver a better deal for Wales or any of the devolved Administrations. The Barnett formula has been revised recently and now includes a needs-based factor to ensure fair funding for Wales in the long term. The recent Budget delivered a very good deal for Wales: the Welsh Government settlement for 2025-26 is, as I have said, the largest in real terms of any Welsh Government settlement since devolution.
Lord Forsyth of Drumlean (Con)
My Lords, might the Minister take the time to read the report of this House’s Select Committee on the Barnett Formula, which was delivered 15 years ago? It clearly showed that Wales loses out substantially under the Barnett formula and recommended that we move to a needs-based formula which would treat all parts of the United Kingdom fairly. The previous Government ignored that for their own reasons, but now is an opportunity for a Labour Government to help a Labour Administration in Wales.
Lord Livermore (Lab)
I always take the noble Lord’s recommendations extremely seriously. I will certainly read the report he recommends, although it is interesting that it came out 15 years ago and for the subsequent 14 years his own party was in government.
Lord Anderson of Swansea (Lab)
My Lords, the blunt fact remains that Wales is at or near the bottom of all the indices of deprivation within the United Kingdom, so will the Government look at this again, particularly in relation to Scotland, and try to align Wales’s position not just in comparison with England but with Scotland?
Lord Livermore (Lab)
I do not think the Government have any such plans, but the Budget delivered for all the devolved assemblies a record amount in settlements since devolution.
Baroness Randerson (LD)
My Lords, the previous Conservative Government decided that, despite the fact that not a single yard of HS2 would be built in Wales, it would not get any Barnett consequential funding from that. That decision was criticised from the Labour Benches and deeply criticised by the Welsh Labour Government. How is it that the new Government can defend the decision of their Conservative predecessor?
Lord Livermore (Lab)
As I understand it, as heavy rail is a reserved matter and the UK Government are therefore responsible for heavy rail infrastructure across England and Wales, they spend money on this in Wales rather than funding the Welsh Government to do so through the Barnett formula. This approach applies to investment in HS2 and is consistent with the funding arrangements for all other policy areas that are reserved in Wales, as set out in the Statement of Funding Policy.
Lord Foulkes of Cumnock (Lab Co-op)
My Lords, further to the excellent question from my noble friend Lady Wilcox of Newport, can the Minister confirm, following the resetting of relations with the Scottish and Welsh Governments after the 14 disastrous years of the Tory Government, that through Brand Scotland and its Welsh equivalent, Scottish and Welsh heritage and products will be promoted throughout the world by this United Kingdom Labour Government?
Lord Livermore (Lab)
As always, my noble friend says it far better than I could. I nearly always agree with him, and I do so on this point in particular.
Baroness Foster of Aghadrumsee (Non-Afl)
My Lords, the Barnett formula was introduced for Scotland by a Labour Government in 1978; then it was applied to Wales and then to Northern Ireland. That is nearly 50 years ago. Surely it is time to look at a new mechanism that will reflect the modern devolved Administrations.
Lord Livermore (Lab)
I give the noble Baroness the same answer that I have given already: I do not think the Government have any such plans. The Northern Ireland Executive settlement for 2025-26 is the largest in real terms of any Northern Ireland Executive settlement since devolution. The Northern Ireland Executive will receive £18.2 billion in 2025-26.
Lord Harlech (Con)
My Lords, the Government have stated that one of their priority aims is to grow the economy, yet their counterparts in Wales cancelled all road-building projects in 2023. How will this help growth in Wales and across the United Kingdom?
Lord Livermore (Lab)
The noble Lord is quite right that growth was one of the biggest failures of the previous Government over the past 14 years. It is absolutely our priority to do something about that. Obviously, one Budget cannot turn around 14 years, but we have already seen its measures increasing growth throughout the United Kingdom in the medium term.
Lord Hunt of Wirral (Con)
Will the Minister answer the question, please? There is an urgent need for infra- structure investment in Wales. What meetings does the Minister propose to have with his Labour counterparts in Wales, to ensure that key projects—such as the third Menai bridge to Ynys Môn, and the Newport bypass—go ahead as quickly as possible?
Lord Livermore (Lab)
I am not sure what question the noble Lord thinks I have not answered. He asked me specifically about investment projects. Of course, under his Government, we were the only country in the G7 to have investment levels below 20% of GDP. We have introduced planning reforms, which the previous Government could have introduced at any point in the past 14 years but did not. We are doing more on investment in a few months than the previous Government did in 14 years.