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“The independent Holtham Commission was established to meet a key One Wales commitment to look at funding and finance in Wales, including the Barnett formula.

“We welcome the report and are grateful to the Commission, chaired by Gerry Holtham, for producing such a thought-provoking analysis and a clear set of recommendations. The report makes a persuasive case for reforming our current funding arrangements and for strengthening the devolution resource allocation process.

“The report makes a good argument that need should be the principle for allocating resources in a devolved system. However, the report also acknowledges that introducing a needs-based formula is likely to be complex and will take time. We will need to make sure that any major changes are introduced on a basis of mutual agreement between ourselves, the other devolved administrations and the UK Government.

“The Commission’s analysis has shown that funding for Wales is currently quite close to being on a par with what it would receive were it funded by the various formulae that the UK Government uses to allocate resources across England.

“Over the past decade, UK government spending increases have delivered very large absolute increases to the Welsh budget through the Barnett formula. However, we have long been aware that the Barnett formula could, over time, result in a 'squeeze' on the relative resources available to Wales, reducing the gap between the resource available to spend per head on devolved public services in Wales and what is spent in England on the same set of responsibilities.  This was one of the reasons for establishing an independent Commission  - to set out the facts in an objective way.

“The analysis in the Holtham report demonstrates that we were right to be concerned about convergence in relative spending per head. If left unaltered, the Barnett formula will cause spending per head in Wales to move ever closer to the average spending per head in England, irrespective of whether or not Welsh needs are also converging towards those of England.

“The report sets out a compelling case that there is little rationale for any further convergence in public spending per head in Wales. The Commission has proposed a simple modification to the Barnett formula that would result in additional resources being made available to Wales and that could be implemented in advance of wider reform.

“The report also makes a series of important recommendations to improve the transparency of the processes and administration associated with the Barnett formula.

“The detail of how the recommendations could be implemented will of course require further thought, but we endorse the report's main findings and we intend to pursue the Commission's recommendations with the UK Government.”

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