Spending review: ‘Levelling up’ must mean fixing Wales’s flawed fiscal settlement

Plaid Cymru outline key asks for 2020 Spending Review.

Plaid Cymru Treasury Spokesperson, Ben Lake MP, has called on the Chancellor to “fully commit to devolution and levelling up” by committing to “fix the flawed fiscal settlement that leaves Wales reactive to English spending”.

Ahead of the Spending Review today (Wednesday 25 November), Mr Lake has urged the Chancellor to temporarily ease the drawdown limit on the Welsh Reserve to “better help Welsh businesses as in England”.

The Ceredigion MP highlighted that the pandemic has “exposed the tragic consequences of an unbalanced fiscal settlement”, with businesses in England being able to benefit from an open-ended and generous Local Restrictions Support Grant, while Welsh business have had to compete against each other for a limited source.

Currently, the Welsh Government’s drawdown limit is £125m for revenue spending and £50m for capital investment, meaning that the Welsh Government’s ability to mount fiscal interventions is significantly limited by Westminster. This is exacerbated by the Welsh Government budget size being largely determined by spending in England in devolved areas, creating annual uncertainty regarding the overall Welsh budget size and disincentivising multi-year year spending commitments in Wales.

Ben Lake has also urged the Chancellor to ensure that the successor to EU regional funding, the UK Shared Prosperity Fund is “additional investment, and not be outweighed by spending cuts elsewhere”. A key element of European funding, particularly ERDF, is the additionality which it brings to Wales as project funding above Welsh Government expenditure. Plaid Cymru has called for this principle to be maintained for the UK Shared Prosperity Fund.

Mr Lake has also warned against a public sector pay freeze which would be “a grave disservice to public sector workers who have worked tirelessly throughout the pandemic”.

Ben Lake MP said:

“The pandemic has exposed the tragic consequences of an unbalanced fiscal settlement. Businesses in Wales have been forced to compete against each other for access to capped funding, whilst the UK Government has ensured that every business in England will receive the support that they need by offering local authorities top-up payments to the Local Restrictions Support Grant scheme. Easing the Welsh Government drawdown limit to better help Welsh businesses as in England is a matter of fairness.

“The Spending Review will also be a test of the Government’s promises on regional funding. Wales was promised ‘not a penny less’ after the withdrawal of EU structural funding, and so support from the Shared Prosperity Fund must constitute additional investment, and not be outweighed by spending cuts elsewhere.

“Plaid Cymru is also clear that a public sector pay freeze would be a mistake, and a grave disservice to public sector workers who have worked tirelessly throughout the pandemic.”

“Wednesday’s statement is the opportunity for the Chancellor to fully commit to devolution and levelling up. If the Conservatives are sincere about devolution, they will fix the flawed fiscal settlement that leaves Wales reactive to English spending rather than proactive to Welsh issues, a public image and policy reality that for too long has suited anti-devolutionists.”