Assembly Government budget to be 'cut by £1.8bn'

The Welsh Assembly Government says its budget will be cut by £1.8bn in real terms over the next four years, following the Spending Review.

Welsh Secretary Cheryl Gillan said the review was "fair" but First Minister Carwyn Jones called it a "hammer blow".

The assembly government said the cuts were at the lower end of predictions, but the budget was the "worst since devolution".

Overall, the UK government is making £81bn cuts to UK public spending.

The UK government wants to eliminate the country's £109bn structural deficit by 2014-15.

Ms Gillan said: "The Welsh Assembly Government is facing smaller cuts than most UK government departments but, like everywhere else, tough decisions will have to be faced in Cardiff Bay."

It was a "fair funding settlement for Wales," she said.

Responding to the review, a spokesperson for the assembly government said: "Our budget next year will be almost £900m less than this year and comes on top of the savage Budget in June, representing the deepest public spending cuts since World War 2."

However, a discrepency between the way the Treasury and the assembly government calculate the Welsh budget has emerged.

The Treasury figures state that spending will fall from £15bn this year to £14.6bn in four years' time, a drop of £400m in cash terms.

The assembly government has calculated its figure from a higher budget starting point, £15.12bn, and has factored in the effect of inflation over the four years.

Welsh Labour leader, and First Minister, Carwyn Jones said the Treasury had not taken inflation into account when delivering its figures.

He said: "Let's not pretend this is good news. Today's announcement is a hammer blow for the people of Wales.

"This is the worst settlement of any of the devolved nations. The cuts we face over the next five years will be very challenging."

The Treasury's own figures, suggest that devolved government in Wales will be hit harder than counterparts in Scotland and Northern Ireland.

The Welsh Assembly Government will see a 7.5% real terms reduction in revenue and another 41% reduction in capital funds. But the comparable allocation for the Scottish Executive will be a reduction of 6.8% in revenue and 38% in capital.

And in Northern Ireland, it will be 6.9% revenue, and 37% in capital.

Plaid Cymru leader and Deputy First Minister Ieuan Wyn Jones AM said: "This announcement is a devastating blow to the Welsh economy. Plaid has consistently argued that the Conservative-Lib Dem cuts were too soon and too deep.

"It is especially concerning the way the Conservative government have attacked welfare payments, targeting sickness and housing benefits in particular.

"There is little doubt that Welsh jobs, Welsh businesses and the Welsh people will feel the pain of these mistakes."

Leader for the Welsh Liberal Democrats, Kirsty Williams said: "The Welsh people understand that we can't pretend that the pain can be stopped at the Severn Bridge.

"However, this settlement is better news for Wales than many were predicting."

She added: "The decisions taken in England to fund the "fairness premium" which will give the poorest children a better start in life, to protect NHS funding and prioritise schools and early years spending will be reflected in the settlement that Wales receives."

However, Shadow Secretary of State for Wales, Peter Hain said the Spending Review was "a reckless gamble".

"Families in Wales will be worried stiff about their future tonight, with more than 60,000 people facing losing their jobs," he said.

Part of the reason for the smaller than expected fall was that spending on health and education in England remained relatively protected by the UK Government, said Lynn Hine, partner in charge of government and public sector services in Wales at PricewaterhouseCoopers.

She said the assembly government still "faces big decisions ahead".

"In England, the health budget is protected, and the schools budget will rise, but it might be difficult to offer the same in Wales," she said.

Public sector jobs

Mr Osborne began his Spending Review statement statement by saying: "Today is the day when Britain steps back from the brink, when we confront the bills from a decade of debt."

The Chancellor said the Office for Budget Responsibility had forecast that 490,000 public sector jobs in the UK would go by 2014-15, much of it through natural turnover of staff departures.

But he said: "There will be some redundancies.

"That is unavoidable when the country has run out of money."

More than a quarter of jobs in Wales are in the public sector, one of the highest concentrations in the UK, raising fears that the country will be disproportionately hit by the cuts.

Darren Williams, campaigns officer for the PCS in Wales union, said: "These cuts are bad for people who work in public services and bad for people who use public services.

"We will be working with other unions to challenge these cuts."

Spending commitments

The Chancellor also gave the following commitments to UK spending in Wales:

• Investment to improve journey reliability on Great Western mainline rail services to Wales - no Department for Transport decision yet on electrification to Swansea

• Investment in the M4/M5 interchange will reduce journey times to and from Wales

• Funding for a package of rail capacity improvements between Barry and Cardiff

• £13bn private finance contract for the future strategic tanker aircraft programme will continue - this includes Airbus UK in Broughton, Wales where the wings will be manufactured

• RAF base Valley, on Anglesey will remain in service

It was also announced that the BBC will take over the funding of S4C, as part of a deal to freeze funding of the licence fee over the next six years.

S4C legal row

The S4C Authority, the governing body of the channel, said it was launching a judicial review of the decision.

UK Government departments will have their budgets cut by an average of 19%. But the effect on areas such as health, transport and education in Wales which are devolved to the assembly government, will not be known until mid-November when the budget is set.

A further £7bn cuts to the welfare system as a whole in the UK - on top of £11bn in cuts already announced - will have a big impact in Wales because of the higher levels of claimants compared to many other areas of the UK, explained Professor Brian Morgan, from the Cardiff Management School at the Universty of Wales Institute, Cardiff.

He said radical change in the relationship between people and public services in Wales was needed.

'Incredibly tough'

"What we have done in the past is now unsustainable in the future," he said.

However, public spending per head in Wales will remain higher than any region in England except London, confirmed the Treasury.

Steve Thomas, chief executive of the WLGA, said that three to four thousand public sector jobs could be lost in Wales over the next two years.

He said: "It's going to be incredibly tough, even if we are talking in the most optimistic terms."

Local governments in England face cuts of 26% to their budgets over the next four years, but councils in Wales will have to wait until the end of November to learn what grant they will get from the Welsh Assembly Government.