The prospect of the Welsh government being able to borrow money to fund major capital projects has moved a step closer.
For the first time the Welsh and UK governments have agreed that, in principle, the Cardiff-based administration should have the power to borrow for infrastructure projects – as long as an independent revenue stream such as taxation is in place to support it.
At a press conference in the Welsh capital on Wednesday, Danny Alexander, the chief secretary to the Treasury, said the move was a significant step forward in devolution.
He said: “Today’s announcement agrees in principle to devolved capital borrowing powers for the Welsh government. This is an important step forward on the devolution journey for Welsh people, and will bring them significant benefits. I am delighted that the two governments have worked closely together to deliver this good outcome for Wales.”
Labour, which leads the Welsh government, is keen to be able to borrow for capital projects, believing this would help it generate economic growth. It would also want to be able to raise some minor taxes itself – but does not want the power to vary income tax.
The Welsh finance minister, Jane Hutt, said: “I welcome the in-principle devolution of capital borrowing powers, which should give the Welsh government an additional lever to generate economic growth.”
She added that she was pleased the governments had also agreed to look at an aspect of the way the funding Wales receives from Westminster is calculated – which the Welsh government believes is unfair.
David Jones, the secretary of state for Wales, said: “I hope that today’s announcement will reassure the people in Wales of the progress both governments have been making on Welsh funding arrangements.”
The announcement comes a few weeks before the Silk commission, which is looking at how Wales ought to be financed as devolution matures, reports.
Jones added: “The commitments made today establish a strong basis from which to work with the Welsh government after the Silk commission reports to me next month.” It has long been a complaint from Welsh Labour’s opponents that it wants power without the responsibility of having to raise major taxes.
Peter Black, the Liberal Democrats’ finance spokesman in Wales, said: “The Welsh Labour government must now understand that greater power involves greater responsibility. For too long this Labour government has sat back and blamed Westminster for their own failings. This can’t be allowed to continue.”
Speaking before the announcement, James Foreman-Peck, director of the Welsh Institute for Research in Economics and Development at Cardiff University, told BBC Radio Wales it was difficult to resist the idea of borrowing powers in principle, but he questioned the timing.
“We’ve got UK national debt rising strongly, we’ve got Europe mired in its debt problem, and here we’re being told Wales is about to join the throng by getting more and more debt,” he said.
In the summer a major survey published by the Silk commission revealed that two-thirds of Welsh people believe the government in Cardiff should be able to set its own income tax rate and have the power to borrow.
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