HS2 and the Barnett Formula explained

Local TV

With Rishi Sunak cancelling one of the biggest infrastructure projects of the 21st century, HS2, questions have been raised here in Wales about what that means for our finances. We helped fund the project, using Welsh tax payers money, and now, the part that was supposed to benefit Wales, the northern section, has been scrapped. So we take a look at what this all really means for finances here in Wales.

Transcript

00:00 HS2 was supposed to be one of the projects of the last few decades, finally bringing

00:04 real high speed rail to the UK. Now it's a thing of the past, as Prime Minister Rishi

00:09 Senek officially cancelled the second stage of the project due to spiralling costs. The

00:13 line will now only run between Birmingham and London, which though better than nothing

00:17 isn't close to the original plans, and really brings to light some issues with the project

00:21 as a whole. While there are plenty of specific issues with the project and its impact on

00:25 London and Birmingham and Manchester etc, it's easy to forget the impact it has had,

00:30 and may still have, on Wales. That's because the project, which started in England and

00:34 ended in England, and only included passengers travelling in England, was marked down as

00:39 an England and Wales project, implying it benefited Wales somehow. But that is an opinion

00:44 for someone else to make.

00:45 It was never a project to benefit Wales of course, but without that link at Crewe it

00:50 is now beyond any doubt what Plaid Cymru has been saying is right, that this is an England

00:55 only project, improving England's railways at our expense.

01:00 The big news there though is that the section of the line that's said to benefit Wales,

01:04 namely the Birmingham to Crewe section, was never built and now will never be built. That

01:08 totally eradicates the England and Wales badge slapped onto the project, something echoed

01:13 by politicians in the Senate.

01:15 If there is to be no link beyond Birmingham, then the flimsy case for regarding this as

01:24 an England and Wales development collapses completely. And at that point, the case for

01:30 making sure that it's consequential for Wales will be stronger still.

01:36 Wales has already missed out on £270 million as a result of HS2 misclassification in the

01:44 current spending review period. That will only grow beyond that unless and until this

01:51 misclassification is put right.

01:54 So as we can see, the First Minister wants this problem sorted and wants it regarded

01:57 as an English project, meaning it will then be subjected to the so-called consequentials

02:01 that you just heard about. Those consequentials are Barnett formula consequentials and they

02:07 are one of the biggest and most important funding mechanisms for the Welsh Government

02:12 and the other devolved governments across the UK.

02:15 There are countless complexities to this, but at its most basic level, funding in Wales

02:20 is equal to funding in England skewed for population multiplied by impact issues. This

02:25 means that if England had a project worth £1 billion, funding for Wales would then

02:29 be £1 billion multiplied by 0.05 because Wales has roughly 5% of the population of

02:34 England with some extra impact multiplications. Wales would then be awarded somewhere in the

02:39 region of £50 million in funding.

02:43 The Barnett formula is rather notorious in the world of Welsh politics and many people

02:46 advocate for it, while others criticise it for not taking outside factors into account.

02:51 Whatever your thoughts on it, it won't be going anywhere anytime soon and with HS2 funding,

02:55 a massive issue on both sides of Offa's Dyke is something you might be hearing a whole

02:59 lot more about in the near future. James P. Watkins, Local TV.

03:03 [BLANK_AUDIO]

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