The UK and Welsh Governments have reached an agreement on borrowing powers for Wales and changing how Wales' share of public spending is worked out. But it's very much an agreement in principle, the Welsh Government cannot yet raise any loans and there will be no immediate change on funding.
The UK Government says it accepts that the Welsh Government should borrow money for construction projects but there must be the revenue to pay for it. There will be no decision on tax raising powers until after the Silk Commission has recommended what taxes, if any, should be devolved to Wales.
Talks are continuing about how to pay for specific projects, notably relieving congestion on the M4 around Newport. Last year, the Chancellor suggested that toll revenue from the Severn Bridges could be used to repay a loan once the cost of building the Second Severn Crossing has been met.
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.
The statement we are publishing today includes a new commitment by both Governments to review the path of Welsh relative funding at future Spending Reviews. I welcome the in principle devolution of capital borrowing powers, which should give the Welsh Government an additional lever to generate economic growth.
I hope that today’s announcement will reassure the people in Wales of the progress both Governments have been making on Welsh funding arrangements. In addition to the in principle capital borrowing powers, the UK Government has recognised the concern in Wales about long term convergence and is committed to investigating options to address it once it resumes. 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.
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