HS2 and the Barnett Formula explained
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.
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NewsTranscript
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.
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