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Written Statement - UK Budget, July 2015

Jane Hutt AM, Minister for Finance and Government Business

The Chancellor of the Exchequer has presented his second budget statement of 2015.

I had called for this UK Budget to deliver investment in our infrastructure to boost the economy, a call that was backed by business in Wales.  I stressed the importance of continuing to invest in schools, health and housing. The Chancellor’s budget fails in all these areas.

Despite the £4m increase in the Welsh Government’s revenue budget announced today, due to reductions to our budget which the Chancellor made last month mean that the Welsh Government’s resources are £46m less this year than in the Final Budget we agreed last December.  In advance of the Budget I wrote to the Chancellor to say that the in-year incremental cuts we have received, including on capital, makes planning difficult.  This is bad news for business and our public services.

The Chancellor stated that he will return to how £37bn of cuts will be found from Whitehall Departments in his forthcoming Spending Review.  Through the Barnett formula these reductions are likely to have significant consequences for us in Wales.  Continuing austerity presents real risks to the public services in Wales which everyone benefits from.

The UK Government has continued to cut back the Welfare state.  The Welsh Government’s own research has shown that changes to welfare that have already been introduced will reduce the income of working-age adults in Wales this year by around £900 million. Although losses vary widely, we estimate an average annual loss of £500 per working-age adult in Wales.  The announcements today will make this worse.  We already know that welfare cuts have a disproportionate impact on Wales and cuts that we have been forced to make to our public services make it difficult for us to fully mitigate the impact.

Whilst the Welsh Government cautiously welcome the National Living Wage and have in fact already delivered it for NHS staff in Wales, it is unlikely to cover the cuts to tax credits for most families.  Freezing working age benefits for four years will hit low income households hardest.  17,550 people in Wales are in receipt of Housing benefit and around 163,000 working families in Wales were in receipt of either Working Tax Credits or Child Tax credits.  Our initial estimates also show that around 5,000 households in Wales will be affected by the lowering of household benefit cap to £20k.   A further 1,200 claimants in Wales could be affected by the changes to the entitlement of Housing benefit for 18-21 year olds.  Taken together these changes will increase pressure on people across Wales’ communities and will impact disproportionately on those who need the most support.

I welcome the Chancellor’s commitment to the ‘funding floor’ to deliver fair funding for Wales and will expect immediate action to secure this as part of the Spending Review.