A new fiscal framework for the Welsh government has been agreed between London and Cardiff.

The framework sets out how the Welsh government will be funded following the devolution of stamp duty land tax, landfill tax and Welsh rates of income tax.

The new arrangement includes a new needs-based factor - set at 115% - within the Barnett formula to determine changes in the block grant in relation to devolved spending.

The framework also involves using the comparable model to determine changes in the block grant in relation to tax devolution. This takes into account the relative Welsh tax capacity and ensures population change is treated consistently within Welsh government block grant funding.

Cardiff’s capital borrowing powers have also been increased and a new Wales reserve will be created to enable the Welsh government to better manage its budget, including the new tax revenues.

‘After constructive negotiations, we have agreed a fair and principled long-term funding settlement with the Welsh government,’ said chief secretary to the treasury, David Gauke.

‘The path is now clear for the Welsh Assembly to consent to the implementation of the Wales Bill. We are delivering on our commitments and the Welsh government can now decide how to use their greater powers and responsibilities to grow and support the Welsh economy.’

The Welsh government’s cabinet secretary for finance and local government, Mark Drakeford, said: ‘I am pleased we have been able to reach agreement about a new fiscal framework which puts our funding on a stable and long-term footing.

‘This is an agreement which is fair to Wales and the rest of the UK.’