Last week, we reported on the findings of a ground-breaking new report which revealed that the fiscal deficit of an independent Wales would be 80% lower than the figure previously quoted by the UK Government.
This week, we follow up with the findings of a Welsh Affairs (IWA) report which concludes that the Welsh Government “lacks fiscal firepower” and proposes that Wales be given “prudential” borrowing powers.
Following research and interviews conducted with public policy and economic experts, the IWA reports that despite Welsh Government having a broad set of powers and a budget in the tens of billions, much of this budget is already “pre-committed” to public service delivery, leaving little left over to deliver major projects that would help transform public services, the Welsh economy and people’s lives across Wales.
The report goes on to state that the correct way to assess the fiscal framework is not only to compare Wales to other countries and state-level governments, but to directly evaluate the scale of challenges and Welsh Government’s ability to deal with them.
The report found that the Welsh Government is restricted in its’ ability to deal with major challenges impacting public service delivery and the Welsh economy due to a “cap” on borrowing powers placed upon it by the UK Government and proposes reform to Wales’ borrowing powers, arguing that the current fiscal arrangements are making it difficult for Welsh Government to fully implement its’ devolved responsibilities.
Other issues compounding these challenges that Wales face are the cost-of-living crisis and the levelling-up fund.
As we reported in the summer, research published by Welsh Government revealed that between January 2021 and March 2025, Wales faces a total shortfall of over £1 billion due to the combined loss of EU Structural Funds and the deduction of EU receipts due to Wales, for work which was part of the 2014-2020 Rural Development programme.
This is in spite of the £632 million allocation from the UK Government’s Shared Prosperity Fund (also known as the “levelling-up” fund) and a 2019 manifesto pledge to replace, or match, EU funding to each country within the UK. Clearly, that promise has failed to materialise.
The IWA concludes that the Welsh Government should be allowed to conduct policy within its’ devolved areas of responsibility, to any scale that Welsh citizens should democratically decide, and negotiated by decision-makers in such a way that is balanced against the fiscal constraints that the government faces.
It is also argued that there has been too little consideration of the democratic rights of Welsh citizens within this debate and on how the current fiscal arrangements limit essential policy-making in Wales. Giving Cardiff Bay these powers will increase accountability and fairness, and the IWA propose that those with a wider remit should explore replacing the current fiscal arrangements and the Barnett formula.
Of course, the news that Wales is severely hampered by a cap in borrowing powers by the UK Government comes as no surprise to us.
The consequences of these fiscal restraints often manifest themselves in poor public service outcomes, which the UK Government then uses to attack Welsh Government policy and justify the continued fiscal arrangements.
In a week of political and economic turmoil in Westminster and given new findings by Professor John Doyle which reveal an independent Wales’ deficit would be similar to the OECD (Organization for Economic Co-operation and Development) average, the time to explore independence and the opportunities it has to offer is now.
This is an article written by Maria Pritchard of Yes Milford Haven and published in the Pembrokeshire Herald newspaper on 21.10.2022