Wales Fiscal Analysis: immediate response to rail funding announcement for Wales

In the briefings prior to today’s Spending Review, the main headline for Wales in the Spending Review would be that Welsh railways would benefit from £445 million, with a briefing that “this investment is more than Wales would have had so far had HS2 been Barnettised”.[1]

In today’s statement, the Chancellor announced that this £445 million would be spread over ten years: six years longer than the period of the spending review period itself. It includes £48 million for enhancements to the Core Valley lines over four years, responsibility for which is devolved to the Welsh Government. In the Spending Review documentation, there are specific mentions of the Borderlands Line and the Cardiff to Bristol line. Beyond this, there is no substantial detail on the profile of this funding in each year of the Spending Review period.

Given the rail enhancement spending currently committed to projects across England, this level of funding would fall well below a population share for Wales over the next decade.[2]

Any suggestion that this funding in any way compensates Wales for the loss incurred from HS2 is obviously unsustainable. It does not substantially change the overall picture of underfunding of Welsh rail infrastructure.[3]

In February 2025, the Welsh Government estimated that the loss in consequentials from HS2 being classified as an England and Wales project (rather than an England-only project) was £431 million, from 2016-17 up to and including 2025-26.[4]

Applying the Welsh Government’s methodology to the Department for Transport settlement announced today, we estimate that the total loss from HS2 between 2016-17 and 2029-30 now stands at approximately £845 million. Over the course of the next four years, Wales will lose more than £100 million in capital funding every year because of HS2’s designation as an England and Wales project, and the cumulative loss will continue to grow significantly at future Spending Reviews. Our workings are shown in the table below.

Today’s rail announcement through to 2034-35 apparently responds to an estimate of loss from  HS2 that has already been rendered obsolete by the much larger losses that will be incurred by the end of this current decade.

The Welsh Government has apparently expended significant political capital in pushing the case for rail infrastructure investment in Wales.[5] In that context, the announcements today feel underwhelming.

Furthermore, by leaving the existing system of funding rail infrastructure in place, it will leave Wales again at the behest of future governments (of whatever political colour) and risk further entrenching rail underfunding at future Spending Reviews.

[1] ITV Cymru Wales, Welsh railways to get £445million investment in spending review, 10 June 2025 https://www.itv.com/news/wales/2025-06-10/rachel-reeves-is-set-to-announce-atleast-445-million-for-welsh-transport

[2] See Barry, M. (2025) The CSR, Wales & rail investment, 4 June 2025  https://swalesmetroprof.blog/2025/06/04/the-csr-wales-rail-investment/

[3] Welsh Government (2020) Historical investment in rail infrastructure enhancements, 19 September 2020  https://www.gov.wales/historical-investment-rail-infrastructure-enhancements-html

[4]Letter from the Cabinet Secretary for Finance and Welsh Language on HS2 Funding, 4 February 2025  https://business.senedd.wales/documents/s158049/Letter%20from%20the%20Cabinet%20Secretary%20for%20Finance%20and%20Welsh%20Language%20HS2%20Funding%20-%204%20February%202025.pdf

[5] Jones, T.G. (2024) Starmer sick of me asking for HS2 cash, says FM,  13 December 2024 https://www.bbc.co.uk/news/articles/cm2l67g2nyro