Uncategorized

Welsh Government Budgetary Trade-offs: Looking Forward to 2021-22

Another four years of pain for public services in Wales?

Under the Chancellor of the Exchequer’s current spending plans, public services in Wales could be facing another four years of cuts according to a new report jointly published today by two think tanks based at Cardiff University. Given growing demand and cost pressures, particularly for health and social care services, this would mean tough choices about priorities and may prompt questions about the future affordability of the current range of public services.

Such projected cuts would be on top of eight years of cuts visited on Wales so far. The report shows that the Welsh Government resource budget for day-to-day spending on public services in 2017-18 has fallen by 8% in real terms (£1.3 billion at current prices) since 2009-10. Capital spending is 32% lower.

Spending on the NHS, and through local government, social services and schools has so far been relatively protected: core NHS funding was 39% of the Welsh Resource Budget in 2009-10 and has now risen to 46% of the total.

Although cuts in local government have been smaller in Wales than England,  total Welsh Government funding of local government still fell by 14% over the period 2009-10 to 2015-16. Despite a 17% increase in council tax revenues (excluding the council tax reduction scheme), spending on unprotected local services such as transport, planning, environmental services, culture and community support was cut by nearly a quarter (23%).

The new Welsh Draft Budget, expected shortly, will for the first time include newly devolved national taxes (such as Land Transaction Tax and Landfill Disposal Tax with partial devolution of income tax rates to come) and take account of the new Fiscal Framework Agreement between the UK and Welsh Governments.

Ed Poole, of the Wales Governance Centre said that, ‘New tax powers make 2018 a watershed moment for devolution. But, especially given the commitment not to increase income tax rates before 2021-22, they will take time to make a difference and may have only a limited impact on the level of public spending in Wales over the next four years’.

The report is primarily concerned with day-to-day spending on public services and sets out a range of scenarios for future UK Government spending. Under the baseline scenario using the Chancellor’s current spending plans, day-to-day spending on public services looks set to fall, with a 3% reduction in the block grant for Welsh resource spending by 2021-22 on top of previous cuts.

If, in this case, Wales continued to protect the NHS, adult social care and schools in response to growing demand and cost pressures, it would mean further rounds of cuts to local government and ‘unprotected’ local services. On one plausible scenario, the cuts in some of these services could reach almost 50% by 2021-22 when compared with 2009-10.

Michael Trickey, Director of the Wales Public Services 2025 programme said that, ‘Continuing austerity would raise serious questions about the future sustainability of some services. There will be a limit as to how far important but unprotected services can be cut to meet pressures elsewhere without damaging local communities economically and socially.’

If the Chancellor responds to pressures to ease the current plans, for example to take account of Conservative manifesto commitments to increase NHS spending, under a second scenario there would still be a cut to the block grant for Welsh resource budget of 0.5% and difficult choices still necessary.

In contrast with day-to-day spending on services, the much smaller budget for capital spending would increase on the baseline scenario by nearly 13% by 2021-22.

NOTES

  1. The report, Welsh Government Budgetary trade-offs looking forward to 2021-22 is being launched at the Senedd today (Thursday 21 September). It has been co-authored by teams at the Wales Public Services 2025 Programme, hosted by Cardiff Business School, and the Wales Governance Centre based at Cardiff University’s School of Law and Politics.
  2. The scenarios are based on economic modelling of the Welsh Budget under a clear set of assumptions. Because of the uncertainties, these scenarios were not able to take account of the impact of Brexit on the economy and public finances.
  3. Revisions were made to some figures on 21/09/2017 to correct for data errors (affecting Table 3.1, Figure 3.1, and Figure 4.6). See appendix 8.7 of full report for full details.

Contact: Michael Trickey, Wales Public Services 2025, TrickeyM@cardiff.ac.uk, 029 2087 0913