Funding system for Wales 'unfair'

The formula to fund spending in Wales was devised in the 70s

A report by a leading think-tank says the way the Welsh Assembly Government is funded should be scrapped.

The Institute of Public Policy Research (IPPR) says Wales gets 8% more than the UK average from the Treasury in London.

But it indicates that the spending still does not correspond to the needs of Wales and much of the UK.

The study says that Scotland is receiving more than its needs suggest it should, at the expense of Wales, England and Northern Ireland.

All political parties in the Welsh assembly say the funding formula is outdated but the Treasury has insisted the way it distributes money is fair.

The IPPR believes the system of dividing up public money around the UK - known as the Barnett formula - is "not fit for purpose".

The formula divides up the money largely according to populations in the different nations of the United Kingdom, but does not take into account public spending such as benefits and pensions payments.

The research says that the Barnett formula leads to wide variations in spending around the UK which could lead to tensions.

The report's author Guy Lodge said: "It does not result in a fair distribution of spending and is becoming an increasing source of tension between the nations of the UK.

"The Barnett formula has very few friends left. Political parties across the political divide and across the UK are voicing their concerns about the way it works," he added.

"This represents a real opportunity for reform which the UK government should now seize."

The IPPR report says if the Welsh assembly gains law-making powers then it should be allowed to vary taxes.

In Wales the assembly government is committed to holding a referendum on full law-making powers on or before the next assembly elections in May 2011.

How the Barnett formula divides up public spending 2007/2008 Wales received �5,050 per head - 8% above UK average Northern Ireland received �5,684 per head - 21% above UK average Scotland received �5,676 per head - 21% above UK average England received �4,523 - 3% below UK average Source: IPPR

In Wales a commission is expected to begin investigating the funding formula from the treasury soon and is due to return with an interim report in Autumn of next year.

In Scotland the Calman Commission has been established to review the funding of the Scottish Parliament.

The Barnett formula was devised in the late 1970s by Labour's chief secretary to the treasury Joel Barnett.

It was intended as a short-term measure but has been retained by successive governments as a way of funding parts of the UK.

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