Page last updated at 11:41 GMT, Tuesday, 7 December 2010

Scrutiny of the first minister committee

Reforming the way money is allocated to the Welsh assembly and growing the Welsh economy will take priority over introducing tax-varying powers, according to the first minister.

Carwyn Jones AM told the scrutiny committee on 7 December 2010, that replacing the Barnett formula, which allocates money to Wales on the basis of population, with a system based on need was essential for Wales.

A independent commission headed by the economist Gerry Holtham reported that Wales is losing out on some £300m per year under the current funding formula.

Mr Jones said that he believed the implementation of the Calman Commission (a review of Scottish devolution) in Scotland would present an opportunity for the UK government to reform the funding formula.

Chief Secretary to the Treasury Danny Alexander MP told an assembly committee on 22 November 2010 that there is currently no commitment on the UK government's part to reform the way Wales is funded.

The scrutiny committee had particular questions about the 41% cut to the capital budget as it scrutinised the assembly government's draft budget.

It was announced in the UK coalition government's Comprehensive Spending Review that the assembly government would receive £860m less next year and £1.8bn by 2014-15, which in turn led to real terms cuts in assembly government departments as announced in the draft budget on 17 November 2010.

The first minister again highlighted that the cut to Wales' capital and revenue budgets are higher than those to the Scotland and Northern Ireland budgets.

David Melding AM, the scrutiny committee's interim chair, questioned the assembly government's rationale in passing on the majority of the capital cut to local governments that play a major part in driving growth in local economies.

The leader of Welsh Labour said that this was because, unlike the assembly government, local authorities have the ability to borrow money if needed.

Read this in Welsh.

Members of the scrutiny of the first minister committee

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