Welsh First Minister Sees Progress on Fiscal Powers After Meeting UK Prime Minister

Welsh First Minister Rhun ap Iorwerth stated that there has been a "significant step forward" regarding Wales' spending and borrowing powers following a meeting with Prime Minister Andy Burnham.

Burnham convened a National Economic Council meeting in Glasgow on Friday, which included the first ministers of Wales and Scotland. Following the summit, ap Iorwerth expressed optimism, suggesting that the loosening of financial restrictions is now a matter of "how and when."

During the meeting, Burnham advocated for greater devolution of powers to the regions of Wales and Scotland. The prime minister indicated that both first ministers had agreed to collaborate with him on "regional empowerment."

No specific timelines were announced for the proposed changes to Wales' financial arrangements. This meeting occurred amidst ongoing disagreements between the Welsh and UK governments concerning the chancellor's recent budget. Ap Iorwerth had previously criticized the budget, stating it was "not serious about Wales" and that it resulted in a real-terms cut in funding for the Welsh government, a claim the UK government denied.

Earlier in October, ap Iorwerth had outlined a series of demands to the prime minister in a letter. These included requests for powers over policing and justice, increased funding for rail projects, and the removal of restrictions on accessing the Wales reserve, which is currently capped at £350 million. Under current rules, the Welsh government can only utilize £125 million for resource spending and £50 million for capital spending from these reserves annually. Additionally, Wales can borrow up to £1 billion for infrastructure, with an annual limit of £150 million.

"There were some real positives here," ap Iorwerth said. "On fiscal flexibility, the ability for us to use our funding better in Wales, use our reserves better in Wales – and on borrowing powers, I was told clearly that its now was a matter of how and when. That is a significant step forward."

He also noted "clearly an interest" from the prime minister to "really understand that sheer injustice of underfunding of rail in Wales that we have seen for many years." This issue, he said, will be pursued further between his office and Downing Street.

Regarding policing, ap Iorwerth suggested that "instinctively the prime minister wants to go there and there's still work to do."

Burnham described the meeting as "positive" and confirmed that both first ministers had agreed to "work together jointly on regional empowerment in Scotland and Wales as well." He added that a process involving detailed work by officials is now in place to explore potential arrangements suitable for Scotland and Wales. Discussions also covered re-industrialization and the potential devolution of innovation funding.

Welsh Secretary Stephen Kinnock confirmed that fiscal flexibilities and borrowing powers were on the agenda for future discussions between the Welsh government and Number 10 North. He cautioned, however, that "It is going to take some conversations on how that would work in practice. I can't give you a specific time frame as things stand."

Following the budget announcement, which included an additional £450 million for Wales over three years, the Welsh government argued that this funding represented a real-terms cut to its overall finances. A £30 million pledge for a new railway station in Cardiff was also criticized by Wales' transport minister as "an insult."

Downing Street stated after the meeting that ap Iorwerth had "agreed to start a process to explore how each government could contribute to regional empowerment, reindustrialisation and achieving good growth in every postcode." This initiative will be led by No 10 North, involving officials from both governments.

Ap Iorwerth commented, "There was an encouraging consensus that the fiscal and borrowing powers which have for so long put Wales at a disadvantage compared with other UK nations must be revised as a matter of urgency. I welcome the prime minister's comments that this is now a matter of how and when."

Welsh ministers had sought changes to borrowing rules and assurances that proposed child poverty payments would not affect recipients' tax and benefits allowances. While these specific points were not addressed in the budget, discussions regarding the child poverty payments are reportedly ongoing.