‘Borrowing restrictions should be lifted...’

RESTRICTIONS on the Welsh Government’s ability to borrow money should be relaxed significantly to cope with the coronavirus pandemic, according to a report from Cardiff University’s Wales Governance Centre.

Researchers on the Wales Fiscal Analysis programme say Wales should be given greater flexibility to manage its finances during this extraordinary period.

Temporary reforms of borrowing powers would give the country access to millions of pounds more, which could be directed towards vital public services such as the NHS and social care.

Currently, the Welsh Government can only borrow money for capital projects or to make up shortfalls in tax revenue.

It cannot borrow money to cover day-to-day spending and is limited to drawing down £125m per year from an account known as the Wales Reserve – a limit that has already been reached.

With these restrictions in place, the Welsh Government has ramped up spending to combat coronavirus by using transfers from the UK Government through the Barnett formula – based on a population share of spending in England – and from reallocating existing money from within its own budget.

Although the full impact on Wales over the course of the pandemic has yet to be seen, the report argues that factors such as Wales’ older population and higher levels of people with ill-health and disabilities may mean this allocation does not reflect the additional demands faced by public services.

Existing figures in the public domain suggest the impact of the coronavirus is greater in Wales than in England.

The number of confirmed cases per 100,000 of population is 120.8 in Wales against 82.1 in England, for example.

Researchers say removing limits on drawdowns from the Wales Reserve would provide £155m of additional day-to-day spending for 2020-21.

A Welsh Government spokeswoman said: “We’ve announced more than £2bn to tackle the coronavirus pandemic in Wales and continue to use all the tools available to us to boost our response.

“But we agree with the report’s broad conclusions and have called on the UK Government for additional flexibility and need-based funding to respond to Covid-19, particularly given Wales’ relatively older population.”