The ‘biggest mistake’ the Welsh Government ever made

“Any claim that HS2 is an England and Wales scheme is over. It is clear that HS2, or the remnants of it, is an England-only scheme. The UK Government now needs to step up and give Wales the money we are already owed from this failed project.”

These were the words of First Minister Mark Drakeford as Rishi Sunak announced the scrapping of the northern leg of the high-speed 2 rail project between Birmingham and Manchester. The Prime Minister’s decision means that HS2 just links England’s two biggest cities London and Birmingham with very little impact on the wider UK.

This starkly exposes the lie that has been repeated every time a UK politician is challenged on why Wales is not getting any funding as a consequence of the billions being spent on HS2. They claim Wales isn’t getting any cash as a result of the largest-ever rail infrastructure spending spree in UK history because people here will benefit from improved journey times to London. Now that the Manchester leg, and its Crewe interchange, are scrapped even that feeble justification has gone.

So, while Scotland and Northern Ireland receive cheques from Westminster every time another tunnel is dug or length of track laid for HS2 in England, Wales gets nothing. And the reason for this can be traced back to a decision made in the early 2000s in Cardiff Bay which ministers in Westminster have never let the Welsh Government revisit.

The latest funding estimates, which were done in February 2020 so are likely to be already out of date, put the cost of the first phase HS2 work to Birmingham at £44.6bn. If Wales were to get a population-based share of this, it would mean a £2.23bn funding bonanza for Welsh infrastructure spending. This is lower than the £5bn share Wales would have lost out on if the entire project to Manchester had gone ahead but still enough to transform our creaking railways.

Wales isn’t getting this money because, unlike Scotland, rail infrastructure spending isn’t devolved to Cardiff Bay meaning there is no obligation on ministers in London to provide exactly equivalent funding to Wales as they are providing to projects in England. What is little known is that the reason rail infrastructure spending is not devolved is in large part because of a decision of the then Welsh Assembly Government nearly 20 years ago – a decision one academic calls the “biggest mistake the Welsh Government ever made”.

In this special report, we’ve spoken to the minister who was at the heart of that decision-making process and who explains why it was made and to First Minister Mark Drakeford, who was a longstanding adviser to Wales’ then leader Rhodri Morgan before taking the top job himself.

We set out to understand how this could happen. We wanted to know how the UK Government could justify just excluding Wales from a transformational investment that see tens of billions spent across the other nations. We wanted to understand how some could claim Wales was getting some benefit from HS2 even when the Treasury’s own documents show the nation getting a 0% share of funding.

Just as crucially, we wanted to understand how Scotland and Northern Ireland were legally entitled to a share by right whereas Wales was not.

What we found was a hugely-complicated system of funding that underpins transport spending in the UK. It is also one that is now fundamentally disadvantaging Wales because of a well-intentioned decision made by ministers in Cardiff ^[3] Bay in the early years of devolution – and which Westminster has since failed to revisit.

Professor Mark Barry calls it “the worst mistake” the Welsh Government ^[4] has ever made. It is certainly a decision that is set to cost Wales billions in the coming years. Yet the people in charge at the time insist they had no choice back then. And it’s far from clear why Westminster has never allowed Wales to revisit it, despite repeated requests from Cardiff Bay ^[5].

Trains in Wales are underfunded (Image: Media Wales)

What we found explains why, while Scotland and Northern Ireland are now able to make infrastructure decisions around building a transport network for their nations, Wales’s rail network and rail needs are seen as being part of ‘England and Wales’ and we get told we’re benefiting from transport spending happening hundreds of miles from Wales even when economic projections clearly show it will have a negative effect on our economy.

‘The biggest mistake’

It would be wrong to lay all the blame for the situation we are in now on a decision the ministers in Cardiff Bay made more than 17 years ago, before the Senedd was built and before Wales’ fledgling devolved administration was even known as the Welsh Government. Things could have changed since then. Governments at Westminster could have heeded Welsh requests to look at this again. But they haven’t listened and nothing has changed.

Everything that’s happening now is a consequence of decisions made back in the mid 2000s when the ownership of rail infrastructure and the budget for it was devolved to Scotland. This was done at the same time as a major bit of legislation, the Railways Act 2005, was going through the UK Parliament which put in place the regulatory framework that still governs the network in the mainland of Great Britain to this day.

That act, in its words “enables the Scottish Ministers to take increased responsibility for passenger services and infrastructure relating to Scotland”. Those sixteen words effectively ensured that every time ministers at Westminster decided to spend money on railway infrastructure in England, they would have to give Scotland a population-based share.

Yet the wording for Wales was very slightly different. It said only that the National Assembly for Wales (as it then was) “will also take on increased responsibilities for passenger services in Wales”. The difference was just two missing words, “and infrastructure”. The administration in Cardiff Bay got responsibility for the train services but not the track they ran on. And 18 years later, as England launches into a once-a-century spending bonanza on track, that has made a huge difference.

The reason that Wales didn’t get responsibility for infrastructure was that the Assembly Government, as it was then known, in Cardiff Bay didn’t want it. The transport minister at the time was Labour’s Andrew Davies, the AM for Swansea ^[6] West. He was responsible for transport from 2003 to 2007.

He told us that they didn’t want the powers for three simple reasons. Firstly the civil service in Wales didn’t have the skills, experience or capacity to take on responsibility for a rail network. The devolved administration had inherited a civil service from the Wales Office of pre-devolution times that had “very little policymaking capacity”.

Former Labour minister Andrew Davies

“We had nobody really with any expertise in rail, and we had to recruit people with with expertise,” Mr Davies told us. “So it was partly concerns that we didn’t have the capacity and understanding and experience. Taking on the franchise itself was going to be a huge challenge. Taking on responsibility for the infrastructure of the track and the signaling at the same time, would would would be a huge managing issue.”

Secondly, and perhaps more importantly, the Welsh cabinet of the day, led by late First Minister Rhodri Morgan, was concerned by the financial implications of taking the huge Welsh rail network.

He said: “On financial liability at the time there had been massive flooding in the Conwy ^[7] Valley and as a result, the track had been washed away. It was going to cost millions. I remember thinking at the time he was that we would have this challenge increasingly, if we were responsible for the track and the signalling. Capital was tight and how were we going to be able to get the capital to undertake that sort of investment, not just the repairs, but upgrading of the whole infrastructure which was clearly in big demand.”

And thirdly, there was concern at just how integrated the Welsh rail network is with England’s – and how complicated that would make devolution. Referring to the other major transfer of powers to Wales happening at that time, through the Transport Wales Act of 2006, Mr Davies said: “It was it was a time of massive change. And I suppose it was a pragmatic decision of be careful what you wish for, you could take on more than you could actually deliver.

“I think this is a big issue… we could have been in the worst possible position of having responsibility for not just repairs, but also investment and upgrading the signalling on the South Wales line or indeed the North line, and then just not having the resources to be able to do it.”

Mr Davies is insistent that this decision in the very early years of devolution was the only responsible decision that could have been taken. Yet nearly two decades later, with benefit of hindsight there are commentators who see it very differently.

Commenting on this in his blog ^[8], rail expert Professor Mark Barry ^[9] said: “I think that is perhaps the biggest mistake made by the devolved administration in Wales; especially when one looks at how rail enhancement investment in Scotland has been transformed in the period since.”

‘It wasn’t frivolously turned down’

In a recent interview with the current First Minister Mark Drakeford we asked him if he thought that decision had been a mistake, given Wales is now missing out on this huge transport infrastructure spending investment.

He said: “I don’t know really. I think it’s difficult to retrospectively fit a judgment around it. At the time the anxieties were about with the responsibility come with the money. The Senedd then is not the Senedd it is now, it was still in its very early days. We didn’t have the powers that we have now in the middle of our decade.

“The Egyptian potato regulations were still being debated on the floor of the Sendd. We didn’t have primary lawmaking powers. I think the question at the time was, does taking on what would have been a major responsibility, without the powers, without the money, without the experience, was that the right moment to make that a top priority for the government of a time?

“I think you can look back and say, things would have been different if we’d said, yes but it wasn’t frivolously turned down. There were a lot of reasons why people felt that it wasn’t the right moment for it to happen.”

The impact this has

To call rail funding “complex” would be to call rail services in the Valleys “patchy” – a gross understatement. “Byzantine”, “intricate” and “convoluted” all fall short of the mark.

Trying to get straight answers from Westminster politicians on this has been like trying to unpick the Gordian knot. It is this very complexity which is condemning Wales to another century of second class rail. The confusing system is acting as a cloak for the willful underfunding of Wales’ rail infrastructure. In turn this second class rail leaves Wales, which is already one of the poorest parts of the UK, with an infrastructure so poor that it is hard to tackle deep rooted problems like poverty.

It’s not just the tens of billions set to be spent creating the first UK’s high speed track from London to Birmingham that Wales is missing out on as a result of the way rail infrastructure spending is accounted for. It’s also the tens of billions set to be spent on projects such as Northern Powerhouse Rail (or however it will be rebranded), dubbed “the region’s single biggest transport investment since the Industrial Revolution”.

These projects will suck up the vast bulk of “England and Wales” rail spending as it is accounted for by the Treasury. Scotland and Northern Ireland will both get funding to compensate for this largesse. But Wales, as it’s effectively deemed to be part of England when it comes to transport spending, will not.

There will be rail infrastructure spending in Wales but because there is no obligation on the Treasury to provide like-for-like funding for England not only will it not be a fair share but, crucially, it’s also very hard to determine on a year-by-year basis exactly how much money will be spent in Wales compared to England.

We repeatedly ask politicians how they can justify not giving Wales ^[10] a fair share of the funding being spent on rail projects in England and they just tell us that the question isn’t valid because the England and Wales rail network is treated as one and not accounted for separately in the top-level Treasury documents. The Welsh Government isn’t getting funding as a result, they say, because the funding is all handled by Westminster.

In the Treasury budget documents, you can’t look at the UK Government’s future spending plans and work out how much Welsh railways will get because the Treasury accounts for England and Wales as one.

In his speech on Wednesday, Rishi Sunak promised that the money saved by cancelling the second phase of HS2 will be reinvested in local transport projects. “We will reinvest every single billion £36bn on transport projects in the north of England and across the country,” he said.

As part of this, he said that Westminster would pay to electrify the north Wales mainline. But will this spending benefit Wales as much as it should? History suggests not. Academics at the Wales’ Governance Centre have however calculated by looking back just how much Wales has missed out on. According to their calculations, over the eight years from 2011-12 to 2019-20, Wales received a total of £514m less than it would have if it received it under a population-based share of the UK’s rail infrastructure spending.

A well intentioned decision left Cymru open to neglect

The decision nearly two decades ago to refuse the devolution of rail to Wales has left Cymru perpetually exposed to being treated as an afterthought when it came to vital rail investment. This is investment that Wales, with its high levels of poverty and creaking infrastructure, doesn’t just want – it needs.

But in that refusal Wales was condemned to just being another region of England when it came to Westminster’s spending priorities. The entire point of devolution was to bestow the big decisions that the effective the nations of the UK in the hands of the people living in those nations.

Our report shows that by not taking control of rail when it had the chance, Wales was was doomed to become lost in an opaque system of funding that ultimately led to us having the least well funded rail network of any UK nation. It meant that UK Government ministers could tell us that we didn’t deserve a proper share of HS2 because we would be “able to get to London slightly quicker”. When those excuses evaporated along with the Birmingham to Manchester leg of HS2 the excuses changed to “Wales isn’t entitled to any cash because England and Wales is “one big network” (this excuse came from Cymru’s’ “voice in cabinet”, the secretary of state for Wales).

However this ignores the example of CrossRail which built the Elizabeth Line in London. As this was so clearly an England only project the Treasury gave Wales a consequential despite it not being devolved.

But with HS2, they choose to ignore this precedent they themselves set. When their excuses ran out, they fell back on “well this isn’t devolved”. And that ultimate trump card, the card that means Wales’ getting a fair share is a matter of UK Government discretion rather than automatic, stems back to a decision in 2005.

In practice what are left with is like a parent with three kids. Imagine all three kids are in secondary school ^[11] and it is the start of term. They all need new books, clothes and bikes to get to school. What the UK Government is doing is the equivalent of the parent giving two kids £300 to buy what they need for school. They are then saying to the third child “I am not going to give you any money because I have just bought the family a new car. You are going to benefit from the car so you don’t need any other money.”

Yes that third child is materially better off because he will, occasionally, get to ride in the new car. But compared to every single one of his siblings he is far, far worse off.

But this isn’t one child. It is every child in Wales that is condemned to grow up in a country with substandard infrastructure, all because we don’t have control of something so vital to our prosperity. It is time that this wrong was righted.

References

^{^} https://www.walesonline.co.uk/news/politics/rishi-sunak-pledges-electrify-more-27839466 (www.walesonline.co.uk)
^{^} https://www.walesonline.co.uk/sport/football/football-news/wales-host-euro-2028-games-27838615 (www.walesonline.co.uk)
^{^} Cardiff (www.walesonline.co.uk)
^{^} Welsh Government (www.walesonline.co.uk)
^{^} Cardiff Bay (www.walesonline.co.uk)
^{^} Swansea (www.walesonline.co.uk)
^{^} Conwy (www.walesonline.co.uk)
^{^} his blog (swalesmetroprof.blog)
^{^} Barry (www.walesonline.co.uk)
^{^} k politicians how they can justify not giving Wales (www.walesonline.co.uk)
^{^} school (www.walesonline.co.uk)