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Row over proposed Welsh Government multi-million pound borrowing powers

Credit: PA

The UK Government is being accused of trying to 'dictate' to the Welsh Government when it comes to a decision on building a new motorway to ease traffic on the M4 at Newport.

It follows the news in yesterday's budget that ministers in Cardiff could be given power to borrow more money for major infrastructure projects.

The Welsh Government says 'it is not for the UK Government to stipulate how we spend our budget or use our borrowing powers.'

But the Welsh Secretary says it's a move that ensures there's no financial reason why a new road can't go ahead.

Chancellor Phillip Hammond announced extra powers for the Welsh government to borrow money. Credit: PA

That announcement of a potential increase in borrowing powers had been welcomed, but it later emerged that there are strings attached. If the increase is approved any money borrowed would have to be spent on improving the M4.

Plaid Cymru has described that as ministers in London 'trying to dictate' what ministers in Cardiff should do.

But the UK Government says it's only responding to what the Welsh Government asked for.

UK Government sources say the Finance Secretary Mark Drakeford wrote to the Treasury in the summer asking for borrowing powers to be increased, specifically to pay for the M4 relief road.

The Welsh Government acknowledges a letter was sent but disputes that interpretation. A source says the letter simply referred to borrowing for investment priorities including the M4 project.

I'm told that exchange took place in May and apart from a proposal that officials meet there’s been no further correspondence.

The announcement wasn't included in the Chancellor's budget speech, but the Treasury's budget documents states that 'the government will also support the delivery of a new M4 relief road through a review of the Welsh Government’s capital borrowing powers at the Spending Review, to consider whether the borrowing cap should be increased by up to £300 million to support this vital project.'

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Speaking on the Sharp End programme, Plaid Cymru's Treasury Spokesperson, Jonathan Edwards, criticised the conditions which were being attached.

This announcement on extra borrowing powers for Wales is...completely tied to spending it on the M4 and on the British Government's preferred M4 route.

The British government is essentially trying to dictate Welsh Government policy and that's not how devolution works.

– Jonathan Edwards MP, Plaid Cymru

Not dictating, says the Welsh Secretary. Simply responding to what the Welsh Government asked for.

Earlier this year the Chief Secretary and the government received a letter from the First Minister asking for increased borrowing powers in order to deliver this road and I was determined to ensure that the Treasury and the Wales Office played its full part to ensure that that road could be built and that finance wouldn't be the reason to stop it.

I wanted to ensure that when they [Welsh ministers] take their decision, which was a manifesto commitment in two elections by the Labour party, that money wouldn't be the reason for it not to go ahead. The money's available; they've also had a significant increase in their capital spending capacity so if you put these together there is sufficient money to deliver whatever route they decide.

– Alun Cairns MP, Secretary of State for Wales

(NOTE: In the above quotation, Alun Cairns mistakenly states that the letter was written by the First Minister. I've left the text uncorrected but to avoid confusion the letter he refers to was written by the Finance Secretary Mark Drakeford.)

A Welsh Government spokesperson has denied that the request for an increase was linked exclusively to plans for improving the M4 and says 'it is not for the UK Government to stipulate how we spend our budget.'

We requested the UK Government reviews the Welsh Government’s borrowing cap, in line with the fiscal framework agreement, for it to be raised at the next spending review. This request was made to help us fund our ambitious capital infrastructure programme, which potentially includes an M4 relief road, subject to the outcome of the public inquiry. As a result of the UK Government’s failed austerity policies, our capital budget has been cut by 10% since 2010-11, which means we have £200m less to spend on vital infrastructure. Despite declaring austerity to be over, the Chancellor could only find a paltry £2.6m for infrastructure next year in his Budget yesterday. It is not for the UK Government to stipulate how we spend our budget or use our borrowing powers. We make proposals in our budget, which are then put to members of the National Assembly to scrutinise and decide.

– Welsh Government spokesperson

Currently the Welsh Government can borrow up to £1bn to fund major infrastructure projects.

It's widely thought that money would be used to fund improvements to the M4 but there are no conditions on its use.

However I understand that no decision has been taken on whether or not any new motorway would be paid for entirely by borrowing or by a mixture of borrowing and existing funds. Other projects are also being considered which could be paid for by borrowing, such as a third Menai crossing.

A decision on whether or not to go ahead with an M4 relief road is due to be taken in December.

A report by an independent inspector is being looked at by officials before being passed to ministers within the coming weeks.