Cancellor Rachel Reeves’ Ƶ Budget had a direct effect on the Welsh transport industry.
It also had a major impact on Finance Secretary’s Mark Drakeford’s £26bn Wales budget of which £21bn (81%) comes from the Welsh block grant through the Barnett consequential funding based on an outdated formula rather than on need.
Many, including First Minister Eluned Morgan, regard this as underfunding, in relation to need. The recurrent underpayment also arises through the often referred to HS2 decision not to change the status of that investment to an England only scheme. Last week HM Treasury made it clear they would not change this position.
This, and South Wales to London journey times (increasing as a result of the HS2 Old Oak Common station ), is a test of how much difference a Labour Whitehall government will really make to transport services and expenditure in Wales. The First Minister is trying to persuade Sir Keir Starmer because he alone (as First Lord of the Treasury) can direct HM Treasury to change its position.
With current inflation rates the £1.7bn (3.8%) block grant increase is a zero increase in real terms. If the speculation is correct, that much of that £1.7bn is to be spent on public sector wage increases it could mean a reduction in real terms for transport public sector investment.
It is for the distribution of this money that departments will have recently been fighting. Having had the final available sum cabinet secretaries will now have to decide how that funding will be allocated within their department.
Welsh Government transport expenditure this year will be £1.4bn. Consequently, the Welsh Government’s transport objectives and, more importantly, those of road and rail users are some financial distance from being achieved. However, Mr Drakeford made it clear that his budget will not achieve what the transport network requires.
Even before his statement, chief executive of Transport for Wales, James Price, made clear in his forward of the Bus Reform Road Map almost a year ago that “future funding will be a challenge which means the (well-deserved) improvements we can make which the people of Wales need and deserve will be done incrementally … when the funding becomes available”
Transport Secretary Ken Skates has several on-going demands upon his budget before considering new projects.
The Core Valley Lines electrification is almost complete between Cardiff Central to Treherbert, Aberdare and Merthyr Tydfil. Infrastructure initially estimated to cost £500m and now at £1.1bn will in 2025 will require remaining capital expenditure and the leasing charges on the £800m of new rolling stock.
Several road schemes are in progress and travelling through the A465 Clydach Gorge section, one becomes aware of the construction scale on this strategically critical road link to England’s Midlands. This is a high-cost investment.
According to a Western Mail survey last week public transport users want sufficient rail and bus revenue support funding to provide a reasonable service level. Operating costs especially fuel and labour will increase annually (not helped by employers national insurance contributions in Chancellor Reeves’ budget).
Integrating bus and rail services under the government’s bus reforms will also incur costs (some suggest at a high level) if it is to be successful.
Probably the biggest complaint from road users – be they cyclists, pedestrians, car users or van, bus and HGV operators – is the poor road surface in Wales (and other parts of the Ƶ). Based on Ƶ estimates, the cost of removing all potholes in Wales is £800m. The Ƶ Government provision of £25m goes nowhere to reduce safety concerns and damage costs.
Welsh Government will also have to consider the financial implications of Transport for Wales (TfW) working with Great British Railways (GBR) and not being a part of it. Such a structural form provides a base to achieve bus franchising and control of all train operations, bus/rail service and fares integration which has been the core of our government’s policy for decades.
There has to be a fundamental change in block grant calculations to achieve the government’s transport programme with full ‘needs based’ funding. Transport quality is a foremost inward investment criterion – essential to replace many jobs lost in 2024.
Blwyddyn Newydd Dda/Happy New Year.
- Professor Stuart Cole CBE is Emeritus Professor of Transport (Economics and Policy) at the University of South Wales.
