Skip to main content

Welsh Government Fiscal Framework

Statement made on 19 December 2016

Statement UIN HCWS377


The UK Government and Welsh Government are today announcing a new funding settlement for Wales based on need, empowering the Welsh Government to grow the Welsh economy.

This historic agreement lies at the heart of the Wales Bill’s determination to provide secure, long-term funding for the Welsh Government. The deal sets out how the Welsh Government will be funded alongside the devolution of stamp duty land tax, landfill tax and Welsh rates of income tax in a manner that is fair for Wales and fair for the rest of the UK.

Through these new and principled arrangements, the government has ensured that the Welsh Government will have a fair level of funding for the long term, taking into account Welsh tax capacity and treating population change consistently across tax and spending.

This deal underlines the mature relationship between Westminster and Cardiff as we move closer to agreeing a lasting settlement for the people of Wales.

This will be achieved through the creation of a new needs-based factor within the Barnett Formula to determine changes in the Welsh Government’s block grant in relation to devolved spending. The governments have also agreed to use the Comparable model to determine changes in the Welsh Government’s block grant in relation to tax devolution. Alongside the Barnett Formula, this will ensure population change is treated consistently within the Welsh Government’s block grant funding.

This agreement will also double the Welsh Government’s overall capital borrowing limit to £1 billion and increase the annual limit to £150 million. We will also create a new Wales Reserve to enable the Welsh Government to better manage its budget.

This agreement therefore paves the way for the National Assembly for Wales to consent to the Bill and enable the Welsh Government get on with the job of using their new tax powers to grow the Welsh economy.

Statement from

Wales Office