From the climate crisis to the National Health Service through to the housing crisis and public transport, Wales faces both urgent and threatening challenges.

We are not unique in this regard; they are challenges facing most countries on the planet.

But Wales is almost uniquely disadvantaged in its ability to meet these challenges because of severe limitations on its ability to borrow to invest. Prudential borrowing is a relatively cheap form of borrowing which allows governments to finance long-term policy projects designed to make a return on investment.

Most national governments have access to a variation of this form of borrowing – some on better terms than others. But Wales is limited to just £1bn of borrowing per Senedd term.

It is difficult to overstate just how inadequate this settlement is.

Hamstrung

The £1bn cap is set by the UK Government and brutally hamstrings the Welsh Government. Not only does it mean that Wales is in a less favourable position than most other countries on the planet, but because County Councils in the UK have access to prudential borrowing, it means our nation is in a weaker position than local authorities too.

In October last year, the Institute for Welsh Affairs (IWA) published a report into Wales’ ‘fiscal firepower’. It concluded that the current Welsh fiscal settlement has a ‘chilling effect on policy’. With over 90% of the Welsh Government’s budget being spent on vital public services such as health, housing, education and local government, most of the money is essentially pre-committed.

The ’chilling effect’ referenced by the IWA is that Wales has almost no financial room left to make investments, conduct major infrastructure projects or kickstart transformational policies.

It relegates the Welsh Government to little more than “managing” public services on behalf of the Westminster Tory Government.

Such is the extent that Wales has been backed into a fiscal corner, it has led to the Welsh Government effectively resurrecting Private Finance Initiatives (PFI), under the new moniker Mutual Investment Model (MIM). This is a form of expensive financing of projects which relies on private companies carrying out major infrastructure projects on behalf of the state.

Instead of the Welsh Government building schools, profit-driven companies build them instead. The Welsh Government uses the MIM model whilst publicly admitting that it does not want to, which demonstrates how untenable the current situation is.

It is clear that this financial settlement doesn’t suit Wales.

But it very much suits the current UK Government. It locks in long-term reliance on neoliberal economic orthodoxy and prevents Wales from borrowing to invest in successful state-owned public services and infrastructure. And in so doing, it prevents the possibility of Wales showing that there is a better way.

Of course, like any national government, there is no guarantee that any Welsh Government with prudential borrowing powers would necessarily make the right long-term investment decisions. But, the ability to transform Wales should not be at the whims of whichever party happens to be in charge in Westminster – it should rest with the Welsh Government.

Incomprehensible

Accepting the existing status quo for any longer is incomprehensible. Across Wales, we have paid the price for doing exactly that.

The results of the last 12 years are impossible to escape, whether you live in Wales or England. The worst fall in living standards since records began, real terms wage cuts for workers, the NHS on the brink, a demoralised public sector workforce, a housing market which is completely out of control and more foodbanks than branches of McDonalds.

We should not merely accept this and hope for a change of government at UK level. We must embrace every opportunity we have here in Wales to lead. In order to do that, we must demand access to the tools required to lead properly.

If we don’t, Wales will continue to be handcuffed to the decisions made by whoever happens to be the UK Chancellor, with limited powers to brunt the worst excesses of his or her decisions.

I believe in Wales. I believe in our ability to craft our own future and I believe in our ability to build a state which is fit for that future.

A Wales with prudential borrowing powers could invest in the social housing we so desperately need to tackle the housing crisis. It could choose to invest in state-owned renewable energy projects, a Green New Deal, an expanded National Health Service and quality public transport.

It is a Wales that the Welsh people deserve, and we must demand it.

• This article was originally written for and published by Nation.Cymru: https://nation.cymru/opinion/for-wales-to-progress-we-need-prudential-borrowing-powers/