Page last updated at 18:03 GMT, Thursday, 14 January 2010

Funding formula 'needs hard look'

UK Treasury minister Liam Byrne
Treasury minister Liam Byrne met with assembly government ministers

The UK government should "look hard" at the funding system for Wales, a leading Westminster minister has said.

Treasury minister Liam Byrne spoke about the Barnett formula after a meeting with assembly government business and budget minister Jane Hutt.

They were joined in a video link-up with finance ministers from Scotland and Northern Ireland.

The Holtham review of the formula for funding from Westminster recommended a fairer system, based on need.

"The work needs to start right away," said Liam Byrne, chief secretary to the treasury.

The government needs to "take a good hard look" at the Barnett formula, he added.

'Persuasive case'

Ms Hutt said: "The question of how the devolved regions are funded is a very important one, which we recognised by setting up the independent Holtham Commission.

"The commission's first report made a persuasive case for reforming our current funding arrangements and for strengthening the devolution resource allocation process.

"We are continuing to pursue its recommendations with the UK government."

The investigation into the Barnett formula funding for Wales was chaired by economist Gerry Holtham.

The report said that without reform Wales could lose out by as much as £8.5bn by the end of the next decade - equivalent to £2,900 per Welsh resident.

It called for a change to a needs-based formula to work out funding from Westminster.

Interest rates

The meeting between Ms Hutt and Mr Byrne and with the other devolved finance ministers also looked at the issue of public spending in the economic downturn.

Mr Byrne said: "There are clear signs that the worst of the recession is behind us, but growth is fragile and the government will take steps to lock-in recovery.

"The priority over the next four years was to keep interest rates down and halve the deficit," he said.

"(But) we can't rush into that as it would risk the recovery... spending needs to rise during 2010 to protect local policing, schools and hospitals."

Finance ministers also discussed funding for the flu vaccine which would be kept under constant review, said Liam Byrne.

But there had been less pressure on the NHS because swine flu cases had been fewer than expected, he added.

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