A REPORT calling for the devolved nations to have greater spending and borrowing powers - including the ability to launch their own furlough schemes - has been welcomed by the Welsh Government. 

The report by academics calling for the reform of funding arrangements to devolved governments across the United Kingdom comes amid increased tension with Westminster over financial support in the face of the Omicron variant of Covid-19. 

Mark Drakeford, as he announced new restrictions that will close night clubs on new year’s eve, last week complained it was “unfair” the Welsh Government couldn’t restart the furlough scheme. 

The Welsh Government did announce £60 million will be made available to support businesses when the new restrictions close clubs from December 27 and also has a £3 million pot available for sports clubs and venues impacted by the ban on spectators from December 26. 

There is also the possibility that further restrictions on the hospitality industry could be announced today with the Senedd recalled for an update on Covid restrictions. 

But figures across Welsh sport, from semi-pro football to professional rugby, have questioned if the sum is sufficient and businesses that aren't being forced to close are also fearing the economic impact of people staying at home and advised to limit social contacts. 

READ MORE: Welsh Government to receive £270 million to address Covid

In their report the authors, from the Institute of Fiscal Studies, Strathclyde University, and University of Stirling, say that Scottish, Welsh and Northern Irish governments should be either given minimum funding guarantees by Westminster or enhanced borrowing powers, if stringent health measures and additional economic support is needed. 

It also said there could be a regional furlough scheme under certain circumstances. 

The authors said it should be recognised that policy decisions are linked to funding meaning the devolved governments aren’t necessarily able to take the decisions they would like to due to a lack of funding or the ability to borrow money to cover unexpected or exceptional needs.  

The Welsh Government’s latest set of restrictions have prompted some to question whether the cabinet has limited the action to areas of the economy it believes it can afford to provide some support to. 

Professor Bell of the University of Sterling, as well as David Phillips and David Eiser, said that while their report did not take a view on how serious the threat of the Omicron variant was, the rise of the mutant virus or other future outbreak, affected some parts of the UK much harder than others. 

They said HMRC should examine the feasibility of making the furlough and self-employment income support schemes available on a geographical basis, and if it is practical without the risk of significant fraud or error, devolved Governments could be given the option of paying for furlough and income support schemes to be reinstated if they want to tighten public health restrictions significantly. 

As well as complaining that Westminster was failing to help Wales through its refusal to re-start the furlough scheme Mr Drakeford has pointed out that the UK Government holds the technical ability and data necessary for making the furlough payments through payroll. 

The furlough scheme operated from the start of the pandemic to October 2020. 

When the Welsh Government instigated its firebreak lockdown at the end of October 2020 it complained Westminster had refused to re-start the furlough scheme. It did eventually do so when tighter restrictions were introduced in England that November. The scheme, in which the government initially paid 80 per cent of employees’ wages, then ran until October this year. 

READ MORE: Uncertainty as furlough scheme ends on eve of difficult winter

The Welsh Government’s inability to re-start the scheme, or afford even a percentage of wage costs, means there is no direct support for workers unable to work and earn due to the government’s decision to order their employers to shut. 

Some employers have pledged to continue to pay staff but warned they can only afford to do so for a limited period and could eventually be forced to close altogether which would leave employees without any pay. 

Thresholds for hospitalisation, for example, could also agreed above which the UK Government would pay for the schemes, the report funded by the Economic and Social Research Council said, to provide extra support in areas facing the most serious situations. 

Mr Phillips, an associate director at the IFS, said with surging coronavirus rates it was “vital to lean lessons from earlier waves of the pandemic”. 

“If new policy and spending announcements start to come in quick succession, the devolved Governments should swiftly be given some combination of the funding guarantees successfully deployed last year, and/or enhanced borrowing powers, to allow them to respond in a timely and effective way,” he said. 

“Without such measures, they could find themselves uncertain about how much funding will be available until announcements are made for England, potentially holding up policy development and implementation.” 

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Greater borrowing powers would allow devolved governments to better respond to unforeseen events said Mr Eiser, a knowledge exchange fellow at Strathclyde University’s Fraser of Allander Institute: “Set at a modest level, such as one per cent of their resource budget, this would pose no meaningful risks to the UK Government’s overall fiscal stance or fiscal targets. 

“For similar reasons, there is also a good case for extending the devolved governments’ existing – and very restrictive – drawdown limits from their reserves.” 

At present the Welsh Government can borrow up to £1 billion for longer term capital projects and £500 million to manage volatility in tax revenues. 

A Welsh Government spokesman said it welcomed the report: “Ministers in devolved governments should have the certainty that they can protect their populations in a public health emergency with the full backing of the Treasury. Minimum funding guarantees and enhanced borrowing powers are a vital part of this.  

“We agree that the UK Government should not be able to prevent devolved governments from taking steps necessary to protect public health by refusing to activate the furlough scheme, as in the current situation. So we welcome any practical suggestions for how devolved governments could deploy the furlough scheme if they deem it necessary.” 

A Treasury spokesman said the UK Government had worked closely with devolved administrations, and continued to do so. 

“The UK Government’s £400 billion Covid support package has supported people, businesses and public services in all parts of the UK, and we have just made £860 million of additional funding available to the devolved administrations to use how they see fit when tackling Covid-19,” the spokesman said. 

Additional reporting Richard Wheeler, Jane Kirby and David Lynch, PA 

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