An Office for Fair Funding would deliver economic balance across the UK
With a new Office for Fair Funding, no longer would Whitehall be judge, jury and executioner. Wales would stand on an equal footing with London and get a fair hearing when it comes to funding, says Jonathan Edwards MP, Plaid Cymru Treasury Spokesperson.
For decades, British Governments – red and blue alike - have tinkered around the edges of the broken economic system without challenging its fundamental problems. That is why, when Westminster returns, I will propose a piece of legislation to try and make the basis of the economic model fairer.
London and the south east of England continues to act as a black hole, sucking in talent and investment from the rest of the UK. In January this year, Plaid Cymru uncovered figures which showed that the inequality between London and Wales was the worst in Europe.
But what can you expect when, for years, the British State has spent more per head in London than Wales?
That is why, as a first step in rebalancing things, the new law that I will table would establish an independent Office for Fair Funding. At its core would be a statutory obligation to deliver geographic wealth convergence. In other words, it would be legally bound to deliver a fairer economic balance between the nations and regions of the UK.
Let me illustrate the scale of the problem – Inner London’s Gross Domestic Product (GDP – the standard measure of economic success) is 614% of the European average. Contrast this with West Wales and the Valleys which has a regional GDP of 68% of the same average.
These inequalities have disfigured the UK economy to the point where we no longer really have a “UK economy” in any meaningful sense. There is the south east of England and then the rest.
Not only do regional inequalities in the UK remain strikingly high, but, in some places, they are actually getting worse. East Wales, which was considered a ‘more developed region’ by the EU, would now be downgraded to a ‘transition region’.
Unfortunately, we can’t get this far into an article without mentioning the B-word – Brexit.
The idea that wrenching us out of the EU will break the model of economic inequality that has been entrenched by the British State is madness. It will only open the door wider for Westminster to further imbed the imbalance that keeps Wales on the economic peripheries of the economic state and denies our people the opportunities they deserve.
Wales has received more from Europe than it has paid in and in leaving the European Union. The last analysis, in 2016, showed that Wales receives £245 million more from the European Union than it pays in.
The British State, on the other hand, has shown no such urgency in addressing this inequality.
The first task of the Office of Fair Funding would be to fix the broken way Westminster chooses to hand back money to Wales.
At the moment, the majority of Welsh taxes are collected by Westminster and then money is sent back to Wales based on population share. That means, it is not the amount which is needed that drives funding, but the relatively arbitrary matter of how many people live here.
Now the Tory Welsh Secretary Alun Cairns, backed up by the Labour First Minister Mark Drakeford, who jointly negotiated the current funding settlement will say we get a good deal. They will argue there is a ‘needs based element’ to the settlement. Mr Cairns has even claimed that Wales gets £120 for every £100 spent in England. The only problem is, this isn’t quite true.
Let me give you just one of many examples to illustrate this point – HS2, the multi-billion pound electrified railway line between the north of England and London. The project is set to be the most expensive railway in the world per mile, with costs continuing to spiral and its own chairman predicting a overspend of £30bn, taking the overall cost close to £100 billion.
For this all-England railway, you would expect Wales to get a relative uplift in spending. That’s how it works – after all, Mr Cairns claims £100 spent in England means £120 for Wales.
However, unlike Northern Ireland and Scotland, Wales will get nothing close to its fair share, losing out on as much as £4billion, according to some estimates. Why? Because according to Westminster, HS2 is a project for Wales as much as England – the fact that a single piece of HS2 rail line isn’t in Wales doesn’t seem to matter. In fact, HS2 will actually cost Wales money in the long-run and make it less attractive to businesses, according to economic and rail experts.
The problem is any disputes we have with the funding settlement are still decided by a Government in London, totally out of touch with our country.
That is why the new Office for Fair Funding would be a neutral and expert arbiter in disputes. No longer would Whitehall be judge, jury and executioner. Wales would stand on an equal footing with London and get a fair hearing when it comes to funding.
The Office of Fair Funding is not a solution to the most fundamental of problems – that Westminster can never truly represent Wales. We will always remain an afterthought to a British State that is so heavily dominated by one nation and one region of that nation in particular. But I am not going to sit by and watch whilst the current deeply unfair system continues to neglect the needs of my country.
Jonathan Edwards is Plaid Cymru MP for Carmarthen East and Dinefwr and Plaid Cymru's Treasury Spokesperson.