North Wales labour MS urges Chancellor to relax borrowing cap in Wales
North Wales MS Carolyn Thomas has written to the Chancellor of the Exchequer calling for the Welsh Government to be granted prudential borrowing powers.
In a letter to Rachel Reeves, Ms Thomas highlighted the restrictions on the Welsh Government’s ability to borrow.
At present borrowing is capped at £1 billion per Senedd term, a limit she said prevents long-term planning and investment in public infrastructure.
Prudential borrowing powers allow public bodies such as councils to borrow money for infrastructure projects if they can show the debt is affordable and sustainable.
Introduced in 2004, the system means councils can decide locally how much to borrow, provided repayments fit within their budgets.
Typical projects include new schools, housing, or transport upgrades. The Welsh Government does not have this flexibility and remains bound by the £1 billion cap.
She argued that this places Wales in a weaker position than most other nations and even leaves it with less flexibility than county councils across the UK, which can already access prudential borrowing arrangements.
Ms Thomas wrote: “As you will appreciate, investments in public infrastructure, whether that be new hospitals, schools, social housing, or railways, not only improve the wellbeing of the country, but also contribute significantly to economic growth, ensuring a long-term return that far exceeds the initial outlay.”
She said the cap has contributed to the development of the Mutual Investment Model, which relies heavily on private finance to deliver large-scale projects such as road construction and building schools. According to Ms Thomas, this approach increases long-term costs for the public purse.
“With prudential borrowing powers, Wales could accelerate investment in the social housing needed to tackle the housing crisis, provide more 21st century schools and modern hospitals, expand state-owned renewable energy generation, and strengthen public transport infrastructure,” she added.
Local authorities in Flintshire and elsewhere already use borrowing powers to invest in schools, roads and housing developments. Ms Thomas said similar powers at a national level could support the UK Government’s wider mission to deliver a national renewal.
She concluded: “This reform would empower Wales to make the long-term, strategic investments our communities need, whilst also strengthening the UK’s overall economic resilience.”
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