Mark Drakeford, Cabinet Secretary for Finance
This was published under the 2016 to 2021 administration of the Welsh Government
The Chancellor of the Exchequer has today presented his first Autumn Budget.
Ahead of today’s Budget, I repeatedly called for the UK Government to end its flawed and unnecessary policy of austerity, which is damaging public services in Wales and across the UK.
The Welsh Government is not alone in highlighting the need for the UK Government to set a new fiscal direction. The Institute for Fiscal Studies (IFS) has said: “It is perhaps time to admit that a firm commitment to running a budget surplus from the mid 2020s onwards is no longer sensible”.
While we have today seen a small easing of austerity policies, the UK Budget provides no significant boost for hard-pressed public services or relief after seven years of enforced austerity hardship.
As a result of the measures the Chancellor announced today, the funding Wales receives from the block grant will increase. But more than half of this increase is in the form of funding which must be paid back to the UK Treasury.
Our revenue budget will increase by £215m over the period 2017-18 to 2019-20 and our capital budget will increase by approximately £1bn between 2017-18 and 2020-21.
However, £650m of that capital funding is in the form of financial transactions – this is a form of capital funding which must be repaid to the Treasury and there are restrictions on what it can be spent on.
While these modest increases in the resources available to Wales support our priorities, this additional funding will do little to ease the pressures on frontline public services, which have been struggling to cope as a result of the successive cuts to our budget we have experienced since 2010-11.
Even with this additional funding, the Welsh Government’s budget will remain 5% lower in real terms in 2019-20 than it was in 2010-11, equivalent to £900m less to spend on public services.
Despite these cuts, the Welsh Government has taken steps to protect public services in Wales. Recent figures published by the UK Government shows spending on health and social services in Wales is 8% higher than in England with spending in Wales growing faster than any other part of the UK in 2016-17. Spending on education in Wales is 3% higher than in England.
The Welsh Government, standing with our hard-working public sector workers and trade unions, has called on the UK Government to lift the public sector pay cap and provide additional funding to give workers across the UK the pay rise they deserve. I was clear this must be fully funded.
Today’s UK Budget was a missed opportunity to do this for all public sector workers.
For NHS staff, who are waiting the outcome of the independent pay review body, I expect the Chancellor to honour his commitment to fund any pay recommendations in full and to provide a full Barnett consequential.
In addition to the ongoing and severe cuts in public spending that the UK Government’s policy of austerity has caused, it has set a path for additional hardship for the most vulnerable in society through its programme of welfare reform.
Research from the IFS has demonstrated this is having a detrimental impact in Wales and a direct negative impact on child poverty. We have long called for the UK Government to end its damaging welfare reforms and pause the rollout of Universal Credit to ensure the system can provide the support families rely on in a timely manner.
This Budget failed to respond to the calls of many organisations including Citizens Advice and the Children’s Commissioner for Wales to do just that. While the additional measures to manage new claims is a step in the right direction, they fail to address the fact that Universal Credit claimants are waiting six weeks or more for their first payment.
The Budget was also a missed opportunity to provide additional investment in infrastructure to support the economy during this period of uncertainly.
We called on the UK Government to commit to important infrastructure projects in Wales, including the Swansea Bay tidal lagoon and to address the historic and ongoing underinvestment in rail infrastructure in Wales, which was compounded by its decision to cancel the electrification of the mainline between Swansea and Cardiff.
Once again the UK Government has failed Wales by failing to invest in these key projects.
The Office for Budget Responsibility (OBR) has confirmed the UK economy has slowed markedly and its growth forecasts have again been revised downwards. In my recent letter to the Chief Secretary to the Treasury, I urged the UK Government to listen to the International Monetary Fund and the Organisation for Economic Co-operation and Development to take advantage of low interest rates and invest in economic infrastructure.
We welcome the UK Government’s continued commitment to the formal negotiations on the north Wales growth deal and their commitment to consider proposals for a mid Wales growth deal.
Today’s UK Budget is the first under the fiscal framework, which was agreed to manage the devolution of tax powers.
The Welsh Government’s draft Budget 2018-19 was prepared using economic information from the UK Spring Budget, including forecasts from the OBR. The new forecasts from the OBR have an impact on the block grant adjustment and our own tax revenue forecasts, which use a number of OBR economic determinants. Bangor University will now scrutinise how we have incorporated this new information into our tax forecasts as part of its role in independently assuring and scrutinising our tax forecasts. This assessment will be published alongside our final Budget on 19 December.
In Wales, we have taken a different path to austerity, protecting public services form the worst effects of austerity.
The Welsh Government will consider the impact of today’s UK Budget on our own proposals, which have at their heart a commitment to take Wales forward and deliver prosperity for all during these difficult and uncertain times.