Welsh ministers' finances transformed, say experts

Chancellor Rachel Reeves announced an extra £1.7bn for Wales in her Budget

Increases in public spending by Chancellor Rachel Reeves have “transformed” the Welsh government’s budget, finance experts have said.

They say it should allow for a boost to NHS funding next year, without cuts to other departments.

But there could be difficult decisions in future years after a rapid rise in spending tails off.

Finance secretary Mark Drakeford will present his budget to the Senedd on 10 December.

The amount Drakeford has to spend depends largely on the chancellor, who announced an extra £1.7bn for Wales in her Budget on Wednesday.

Although the UK government includes the funding in the next financial year, starting in April, the Welsh government says it is being spent over two years.

More than £700m in day-to-day spending announced by the chancellor is arriving in this financial year.

Drakeford told BBC Radio Wales Breakfast “a good slab of it”, estimated to be around £500m, has already been committed to public sector pay increases.

That leaves him with around £1bn of “new money” in the next financial year, he said.

Compared to recent spending squeezes, he said “to have a billion pounds extra next year, it’s a different world”.

£500m hole

In a blog, experts at Cardiff University said: “These announcements have transformed what would have been an exceptionally tricky budget round.”

The extra funding was “remarkable” compared to the previous Conservative government’s spending plans and Labour’s manifesto, according to authors Guto Ifan and Ed Gareth Poole.

However the funding is “massively front-loaded”, meaning day-to-day funding for public services will grow more slowly after 2026 and capital spending, for infrastructure and equipment, will fall in real terms.

“Given the perennial real-terms increases to the NHS budget, it implies a return to a very difficult medium-term outlook for most public services,” they say.

With waiting times at record high levels, the NHS is likely to be near the front of the queue for extra funding.

But with growing costs and rising demand for services, councils say they face the prospect of a £500m hole in their budgets this year.

Shadow Welsh Secretary Lord Davies said the NHS “is on its knees in Wales” and funding from Tory governments “had disappeared somewhere in the big black hole of Cardiff Bay”.

Reeves has funded a lot of the extra spending with a rise in the National Insurance paid by employers.

It is not yet clear whether Welsh public sector employers will get help to cope with the added pressure on their wage bills.

Welsh government sources expect additional funding above what was announced in the Budget and Welsh Secretary Jo Stevens referred to “further money” when asked about it on Wednesday night.

Plaid Cymru MP Ben Lake told BBC Wales Live that public sector employers should be “compensated in full”.