‘Remove restrictions on borrowing to allow Wales to deal with COVID-19 crisis’, says Plaid Cymru

PLAID Cymru have called for restrictions over borrowing to be removed and reforms to the Barnett formula to allow the Welsh Government to adequately deal with the Coronavirus crisis.

The call comes after a report from Cardiff University’s Wales Governance Centre said that restrictions on the Welsh Government’s ability to borrow money should be significantly relaxed to cope with the Covid-19 pandemic.

Plaid Cymru’s Treasury Spokesperson Ben Lake MP said that the current population share of spending was “not a fair reflection” of the additional demands the pandemic would put on public services in Wales.

Citing business rates as an example, Mr Lake said the cost of matching support given by the Treasury to England wouldn’t necessarily be “covered fully by the Barnett consequential received”.

The Plaid Cymru MP said the Westminster Government should urgently initiate temporary reforms to the Barnett formula including a ‘Coronavirus needs-based factor’. Such reform, he said, would “better capture the demographic profile of the population of Wales” and could account for the potential increases in demand that could be faced by Wales’ public services.

Shadow Economy Minister Helen Mary Jones AM said restrictions on the Welsh Government’s ability to borrow should also be very significantly relaxed or removed entirely.

Noting that Wales has a proportionally older and sicker population than England and proportionally to population a higher number of confirmed cases than England, the Shadow Economy Minister said that Wales “should and must be given” the powers to “protect and care for our people” during the crisis.

The Welsh Government has limited borrowing powers and must currently rely on funding to combat the virus through transfers via the Barnett Formula and reprioritising existing budget lines.

The Barnett Formula allocates funding on a population basis based on share of spending in England on areas that are devolved to Wales.

Plaid Cymru Treasury Spokesperson Ben Lake MP said,

“Whilst the Chancellor may state that the NHS will get ‘whatever it needs’ from the Treasury, we need reassurance that this will apply to Wales as well as England.

“The current population share of spending in England is not a fair reflection of the additional demands Covid-19 will put on public services in Wales.

“For example, despite Welsh Government pledging to match the business support offered in England through business rates relief, the cost of providing the support isn’t necessarily covered by the Barnett consequential received. This is not sustainable.

“The UK Government should urgently consider introducing a temporary uplift to any Barnett consequential to make sure Wales has the funding it needs to respond to the virus.

“Increments coming to Wales from Coronavirus measures could be multiplied by a factor which better captures the demographic profile of the Welsh population, or a ‘Coronavirus needs-based factor’, thereby accounting for the potential increases in demand that could be faced by Wales’ public services.

Plaid Cymru Shadow Economy Minister Helen Mary Jones AM said,

“Wales has a proportionally older and sicker population than England, something that is not currently accounted for. Furthermore, proportionally to population – Wales has a higher number of confirmed cases than England.

“The Welsh Government must therefore be allowed adequate flexibility to deal with the current unprecedented crisis.

“We fully support the Wales Governance Centre report’s conclusion that restrictions on the Welsh Government’s ability to borrow should also be very significantly relaxed or removed entirely.

“While access to the current annual borrowing limit of £200 million a year would be a welcome addition to the Welsh Government’s fiscal response, this annual cap should be temporarily increased, given the very low cost of borrowing

“Removing the annual limit on drawdowns from the Welsh reserve would also allow an additional £155m of day-to-day extra spending.

“In these unprecedented times, Wales should and must be given the needed powers to protect and care for our people during the biggest crisis of a generation.