Fiscal firepower: effective policy-making in Wales

Think tank: Institute of Welsh Affairs

Author(s): Harry Thompson

October 11, 2022

This report from UK think tank the Institute of Welsh Affairs argues that reforming borrowing powers is key to better enable transformative policy making in Wales.

Despite having fairly strong powers and a budget in the tens of billions, our research finds that the Welsh Government only has a limited ability to kickstart major projects to improve people’s lives.

Wales faces urgent challenges including climate change, a cost-of-living crisis, dealing with the fallout of the Covid-19 pandemic and its impact on public services, a broken housing system, and more. These are big problems that will require big solutions. We think that the Welsh Government has a lack of ‘fiscal firepower’, with a huge part of its budget essentially pre-committed to public service delivery. It has relatively little available finance over-and-above that, needed to effectively conduct major projects that could set the Welsh economy and society on the different path it clearly needs.

This paper seeks to open a debate about the impact of fiscal limitations on policy-making by focusing on the Welsh Government’s limited borrowing cap.