HOW MANY billions of pounds Wales has lost through the operation of the Barnett funding mechanism (known as the SQUEEZE) which keeps the country – and more important, for now, the Assembly – going is uncountable, said Gerald Holtham, chairman of the Independent Commisson on Funding and Finance in Wales.

Although if the present system continues, an extra £8.5bn would be lost by the end of the next decade, he added.

But in a masterly presentation to the press Mr Holtham was blunt about several recent effects of the formula and its interpretation on the current financial history of Wales, writes Clive Betts from the National Assembly press gallery.

The managing partner of Cadwyn Capital mentioned issues such as giant Crossrail tunnel linking Paddington station to the City and eastwards, and the Olympics, as areas where Wales was failing to receive its fair share of money spent in England (known as the Barnett consequentials).

Perhaps we should therefore call it the Barnett Fiddle.

The spending on the Olympics was considered to be for the UK as whole – irrespective of the fact that the event was almost entirely located in London, Mr Holtham remarked dryly.

Which means we should perhaps call it the Barnett Double-Fiddle.

Me Holtham seemed even more agitated at the proportion of Olympics spending specifically directed at rebuilding the East End. Where was the consequential moneys which should be available for other for run-down areas in the rest of the UK ?

Which sounds to me like the Barnett Triple Fiddle. Must be more fiddles in Downing Street and the Treasury than in the string section of the WNO Orchestra.

Mr Holtham specifically confirmed the existence of the “Barnett squeeze” whose detrimental working father-of-devolution Ron Davies long ago highlighted.

When he was an AM, Mr Davies frequently talked about the squeeze. Often, his Labour colleagues tried to argue he was mistaken. But now we know he was right.

Mr Holtham’s interim report (the second half will deal with tax-raising) was published with too short a time-lag for political parties to comment in any sort of detail.

Unsurprisingly, the Lib Dems, due to their long-running demand for a radical overview, gave the quickest substantial response.

Peter Black praised the commission’s movement towards the developed Australian system for allocating cash between states.

The Conservatives were more cautious in their response ; hardly surprisingly in view of their opposition until recently to any changes to Barnett.

Nick Bourne said the  commission’s suggestion that a financial floor be implemented to halt any continuation of a Barnett squeeze “seems sensible”. In other words, the amount that Wales gets would cease to fall.

Mr Bourne leads the Tories in the Assembly. But those in London are far more important. What’s the view of George Osborne, shadow Chancellor ?

“He is very open to reviewing it; he understands our position,” said Mr Bourne. As Mr Osborne is one of the most pro-devolution Tories in London, things are clearly on the way to changing.

When Wales Secretary Peter Hain came to give a comment, he largely missed the point. Looking at figures for past years, he said, “Wales compares well with comparable English regions.”

But the story is all about the future. And the way that the trend of the past will have a real effect in the future.

The SQUEEZE of the past has simply meant that, with each successive year, Wales gets a payment that is LOWER each year than the excess for Wales deserve over the English figure because of the country’s needs. This figure is worked out on how much Wales, a poorer country, would get if it were a normal English region.

Wales has now reached the position that it is getting less than it should be according to its needs – ie how much it should be paid to compensate for its demography, geography, and so on.

The graph on page 23  in Funding Devolved Government in Wales: Barnett and Beyond (available free from the Independent Commission; room 2-017; Cardiff, CF10 3NQ) was the one which some journalists missed.

This shows that “the gap in spending between Wakes and England will have roughly halved since the introduction of devolved elected government”. In other words, the Squeeze is now causing the pips to squeeke.

In answer to a question from Cambria, Mr Holtham said that over that period the number of examples of major building programmes in Wales (such as the North Wales Expressway dual-carriageway past Colwyn Bay) which had been excluded from the operation of   Barnett (in other words, paid for by Westminster, over and above the amount expected from Barnett – because the project was so expensive that Barnett was unable to cope with it) had drastically reduced.

In other words, not only are we suffering from a squeeze. We are also being refused help from the centre when we need it.

The same principle is, however, not in operation when London wants to host the Olympics.

Unitary states who play that game often find that after a few years they are no longer unitary states.