Steep cuts loom for Welsh government, warn experts
- Published
The Welsh government would face "serious budgetary challenges" whether Labour or the Conservatives win the UK general election, according to financial experts.
The warning comes in a report from the Wales Governance Centre at Cardiff University, based on the tax and spending pledges in both parties’ manifestos.
The report says Wales would need £870m of additional funding by 2029 if the Conservatives win and £683m if Labour take control, to avoid cuts to non-protected areas.
That assumes Welsh ministers directly pass on spending consequentials for health and education in England.
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Under the report’s baseline scenario the Welsh government would be facing "steep cuts" in other areas to fund increased health spending.
The current funding system means that any money spent on health and education in England triggers an equivalent amount of funding for Wales, using a calculation called the Barnett Formula, which is predominantly based on population size.
The same applies to other areas that are devolved to the Welsh government from Westminster.
In the Welsh government’s draft budget for 2024-25 it proposed cuts of £422m to areas outside the NHS and Transport for Wales, with ministers blaming a lack of funding from Westminster and inflation eroding the spending power of the funds available.
The Conservatives said that the Welsh government has received record levels of funding and questioned Labour’s spending priorities, particularly around the 20mph speed limit and plans to increase the size of the Senedd.
The outlook is also tight on investment or capital spending.
The reports finds that the Welsh government’s capital block grant from Westminster would fall by 7.7% in real terms under Conservative plans, and that a modest £60m a year extra under Labour is dwarfed by cuts which are already pencilled in, leading to a fall of 5% in real terms.
Guto Ifan, who co-authored the Wales Fiscal Analysis, conceded that there was uncertainty in the projections, but said that with both major UK parties having ruled out increasing income tax, VAT and National Insurance, with self-imposed rules around the size of government debt still in place, it was difficult to see how in Labour’s case a promise of no return to austerity would be fulfilled.
“There is going to be a real political problem to fulfil those commitments,” he told BBC Radio Wales Breakfast.
“Local government will be seeing real terms cuts to their budgets which means local government will have to increase council tax… and that will hit poorer households relatively more.”
Business support, arts, sport, communities, regeneration, housing and homelessness would all come under strain Mr Ifan warned.
Plaid Cymru's Liz Saville Roberts said her party "has been honest about the challenges facing public spending and outlined a series of measures to raise funds for public services that would mean big corporations and individuals making vast unearned income are taxed fairly".
"Labour is not being honest about the deep cuts it plans to inflict on Welsh public services when it gets into power in Westminster," she said.