1.3 Holtham Commission
Attempts have been made to tackle this problem. The Independent Commission on Funding and Finance for Wales – which became known as the Holtham Commission after its chair, economist Gerald Holtham – began its work in 2008. It was tasked with evaluating the formula used to distribute money to Wales from the UK Government and identify possible alternative funding mechanisms, such as tax raising and borrowing powers.
The Holtham Commission produced two reports. The first focused on the Barnett formula, describing it as out-of-date and existing solely for political convenience. It recommended the formula be replaced with a needs-based calculation. The second report in 2010 repeated this position and called for the Assembly to be granted some powers over tax including the ability to vary income tax by 3p (as was the case in Scotland) and create some new taxes with the UK Government’s consent. There was also a recommendation to allow the Welsh Government some year-end flexibility and greater borrowing powers to cope with economic fluctuations.
Speaking to the Daily Telegraph shortly after the Scottish independence referendum in 2014, the man who devised the formula, Lord Barnett said:
The real problem is that now no politician wants to tackle it. The Barnett Formula saves people trouble. It saves prime ministers worrying. That’s the way with politics… Here we are, about to make the wrong decision again.