£375m at stake as Wales chafes under Johnson’s upper hand
The continuing battle over Wales’ regional aid funding is a vital issue, argues Political editor-atlarge Martin Shipton
ANEWLY-BUILT office block in the centre of Cardiff has a large sign outside announcing that it represents the UK Government.
A mile away, in Cathays Park, the Welsh Government has its headquarters in a 20th-century building that once housed the pre-devolution Welsh Office.
The arrival of the UK Government in the very heart of the Welsh capital is perhaps a sign of conflict ahead.
While the Wales Office has always had a presence in Cardiff, it has until very recently been low key and inconspicuous.
It’s surely no coincidence that the signage outside the new building has gone up at a time when relations between the two administrations have declined to an all-time low.
People in Cardiff had assumed the office block was erected simply to house HMRC, relocated from the city’s Llanishen district.
But there’s a bigger motivation.
In a post-Brexit political environment, Boris Johnson wants people to know who is in charge.
And he doesn’t mean Mark Drakeford.
Devolution is at a crossroads. While the constitutional element is important, a lot of money is also at stake.
As well as health, education and other devolved functions, the Welsh Government has a legal responsibility for economic development.
Because much of Wales is relatively poor in European terms, it qualified for three successive seven-year rounds of top-level regional aid from the European Commission.
Such funding has coincided almost exactly with the era of devolution, and the billions of pounds that have flowed to Wales have been managed by a branch of the Welsh Government.
Brexit is bringing to an end the EU money and the battle is on to see what replaces it.
During the referendum campaign and afterwards, those who advocated that the UK should leave the EU have persistently claimed that Wales would not lose funding as a result of that decision.
Many assumed initially that the Welsh Government would retain responsibility for post-Brexit regional aid on the assumption that Westminster would accept that economic development was a devolved function.
But that has not proved to be the case, and it is now clear that the UK Government intends to bypass the Cardiff-based administration and send the money directly to local authorities and other bodies in Wales.
The main channel for dispensing the cash will be known as the UK Shared Prosperity Fund.
Already, a smaller pot of money known as the Community Renewal Fund is being allocated on the basis of bids for specific projects nominated by local authorities in so-called priority areas.
In Wales, two of the county boroughs that received top-level EU funding – Bridgend and Caerphilly – have been excluded from the list of priority areas, a fact that does not bode well in the greater context of regional aid funding for Wales.
We do not know whether the UK Shared Prosperity Fund will also be run on the basis of competing bids. So far the UK Government has not disclosed that degree of detail.
What is potentially worrying is that while Westminster has continued to claim that Wales will not see its level of funding reduced, that in itself could anger parts of England that believe they should be getting a piece of the cake themselves.
The UK Government has said it will be spending “at least £1.5bn” a year on regional aid across the whole of the UK.
But up until now, Wales alone has been receiving £375m per year – in other words, 25% of the total amount available.
Is it unreasonable to have doubts that a Conservative government would be able to stand up to pressure from its own MPs, who will want their constituencies in England to benefit from such funding?
While parochial politicians across the border are likely to complain that Wales has received an unfair advantage, the fact is that the money allocated by the European Commission was done so in accordance with a precise formula aimed at providing aid to the most deserving.
The region known as West Wales and the Valleys was entitled to toplevel EU funding because its earnings per head of population amounted to less than 75% of the EU average.
What we can say with certainty is that the formula used to decide the priority areas for the Community Renewal Fund was much more opaque than that.
Blaenau Gwent Labour MS Alun Davies, who represents one of the poorest areas in Europe, said he had questioned Simon Hart, the Secretary of State for Wales, about the seriousness of the UK Government’s commitment to match the £375m preBrexit amount for Wales.
Mr Davies said: “So far as I am concerned, Simon Hart gave both a political and personal commitment to ensure that the regional aid made available to Wales will be no less than £375m per year.
“He made the commitment at a meeting of the Finance Committee in March in response to a question I put to him.
“At the same meeting he told Dai Rees [the Labour MS for Aberavon] that the total would be made up from several funds.
“This is an undertaking that has been made in a formal way to a committee of the Senedd. I hope when Senedd committees are formed for this term that I will again be a member of the Finance Committee.
“The committee has to hold the UK Government to account for this promise and we have to ensure that Wales does not lose out financially.”
Hefin David, the Labour MS for Caerphilly, said: “I know that the commitment has been made repeatedly that Wales will not lose out financially and that we will continue to receive the £375m.
“But in Caerphilly we have already been excluded from the Community Renewal Fund priority areas for no good reason. My worry is that we could come up against a Boris trick of some kind, possibly with the £375m being conditional on our accepting the building of the M4 relief road.
“There has been no transparency about how the UK Shared Prosperity Fund will operate.”
The UK Government suggested last November that such details would be published this spring.
Last week it said details would be made public “in due course”.
How this scenario plays out will be one of the defining themes of this Senedd term.