Britain's economic inequality needs an Office for Fair funding
For decades, successive British Governments – red and blue alike – have tinkered around the edges of a broken economic system that has made the British State the most unequal in northern Europe, with nine of the ten poorest regions as well as its richest within its borders.
Faced with a systemic failure on the part of the British Government to address such disgraceful geographical inequality, this week I introduced a Bill in the House of Commons to create an Office of Fair Funding to provide Wales and other marginalised areas the means to start improving their economy.
The depth and division of the British State's economy is well-recorded and makes a damning judgement of the state of our political system as well as the socio-economic catastrophe that it represents for communities and lives across the UK.
Recent international data demonstrated that the UK had the largest geographical economic inequality in Europe, varying between Inner London, with a regional GDP average of 614 per cent of the EU average, and West Wales and the Valleys' regional GDP of 68% of the EU average.
Other evidence has pointed to the blatant unsuitability and inefficacy of existing political arrangements governing fiscal arrangements within the British State. The UK2070 Commission confirmed that London's position as a socio-economic blackhole sucking in talent and investment from the rest of the UK is underpinned by the Treasury Green Book which favours continued capital investment in the London and the south-east at the expense of the rest of the economy.
In terms of governance, the Public Accounts Committee in July 2019 noted the unnecessary complexity, underperformance and opaqueness in the Treasury's fiscal measures including the Barnett Formula and allocation of funding outside the formula without consequentials. This was highlighted by the dodgy Conservative-DUP deal which resulted in £1bn extra funding for Northern Ireland, shattering what little remaining credibility the Barnett Formula had and demonstrating how Wales' poverty is as much about Westminster politics as economic drivers.
Equally importantly, the Committee confirmed Plaid Cymru's concerns over the comparability factors included in Statement of Funding Policy. These factors, decided unilaterally by HM Treasury, calculate the Barnett Formula and are vulnerable to political tinkering as evidenced by the HS2 project.
This project, currently swallowing up to a third of the UK Government's support for rail - £2.1 billion out of a total of £6.4 billion in the year 2017-18, has been classified by HM Treasury as a 'national' project despite a comparability factor of 0% for Wales, while Scotland and Northern Ireland both get a 100% score. As a result, full Barnett consequentials are payable to Scotland and Northern Ireland but not to Wales.
The evidence is clear – the British State must work more fairly, transparently and effectively to end the geographical inequality that is shortening lives and constraining the potential of communities across Wales and the UK.
That is why I introduced this Bill with the main purpose being to establish an independent advisory body to make recommendations on the equitable distribution of public expenditure across the British State; a new Office for Fair Funding with delivering geographic wealth convergence as its statutory aim.
To make a measurable impact, the Office would advise on the calculation of block grants to devolved administrations, make recommendation on the implications of the devolution of tax-raising powers for the United Kingdom fiscal framework, and act as an independent arbitrator in dealing with the resolution of fiscal disputes arising between governments in the UK.
The Office would introduce transparency, objectivity and fairness into how the British State allocates funding to marginalised areas such as Wales and help correct a political system that has centralised power and created the most unequal economy in Europe. This measure has international precedent with similar measures found in Australia and South Africa, and was discussed in a 2009 report from the Lords Select Committee on the Barnett Formula.
While the Office of Fair Funding would not solve the fundamental imbalance at the heart of the British State, it could at least give Wales, and other neglected areas, the tools to release the productive potential of our communities to start improving our infrastructure and diversify our economies.
Brexit is not an excuse to re-assert Westminster control over Wales, or to forget the pressing socio-economic challenges that already exist within the UK. The bill I introduced would help create a level playing field between the nations of the British State and correct the British State's flawed economic strategy.