Welsh government ready for 'tough deal' in spending review

The Welsh government is braced for a "tough deal" in the latest round of cuts by the Treasury.

The warning comes ahead of the chancellor's spending review on 26 June.

Ministers in Cardiff fear their budget could shrink by a fifth over the course of the decade.

The Welsh Secretary David Jones said Wales had so far been protected from the worst impact of budget cutbacks.

Departments have been given targets on how much to save, with potential cuts being discussed at fortnightly meetings.

Finance Minister Jane Hutt will unveil her next budget in the autumn.

First Minister Carwyn Jones has warned that additional cuts may have to be sought mid-way through this financial year.

'Perfect storm'

In April a report by the Carnegie UK Trust said a "perfect storm" of spending cuts and an aging population was "likely to be more intense" in Wales because of its higher level of poverty and greater proportion of over-65s.

Along with finance ministers from the other devolved administrations, Mrs Hutt met Treasury Secretary Danny Alexander in Belfast last week.

"We know that we are going to have a very tough deal I think in terms of the spending review because they have already indicated in the budget in March that they are going to have to find another £11.5bn on top of the cuts that we've already had to manage," she said.

"That means really difficult and tough choices for the Welsh government."

In an interview with BBC Wales' Sunday Politics, she said had to find £32m of savings this year and faced a further £80m cut next year.

"So you can see year on year the base line has been cut so it takes us forward to projecting a possible 20% cut over the next 10 years," she said.

Some departments, including health and funding for universal benefits such as free prescriptions, will be shielded from cuts.

However other "unprotected" budgets, including local government funding, are likely to feel more pain.

The Conservatives say the NHS should get more protection so its budget rises in line with inflation.

Within the Welsh government's fixed budget, this would mean bigger cuts elsewhere.

'Choices'

However, Welsh Secretary David Jones said Wales has so far been more protected from UK Government cuts compared to other Whitehall spending departments.

He was responding on the BBC Wales Report programme to a question of how hard he had been fighting for Wales around the cabinet table in the lead-up to Mr Osborne's review.

"You have to bear in mind that most of Wales' budget is for health and education. Those are both areas that will be protected at Whitehall and therefore the impact upon Wales will be proportionately less," Mr Jones told programme.

"Plus since the last spending review, Wales has had over £600m more than it would have had under a straightforward Barnett Consequential.

"So, I'm not making any apologies for the fact that because of the legacy we received from the last Government, we've had to make spending reductions."

Welsh Conservative finance spokesman Paul Davies said: "The UK government has had to make tough financial decisions over the last few years because of the previous UK Labour government's financial mismanagement and of course the Welsh government will need to make tough decisions.

"But politics is all about choices and the Welsh government has the power to make those choices and to ensure it prioritises appropriately and that's why we would want to see the Welsh government protecting the health budget, for example."

Meanwhile, Mr Jones called for a new independent body to replace the now-defunct Welsh Development Agency (WDA).

He told The Wales Report that the Welsh government should look at a similar organisation to boost inward investment "run by business people for business people."

The arm's-length body was wound up after 30 years in 2006 in the so-called 'bonfire of the quangos.'

"We saw Wales from a position of regularly being the number one or number two inward investment nation, now coming down towards the bottom.

"Now, the most recent figures that we've seen fortunately show a reversal in that trend. But Wales' inward investment performance has been rather dismal," he said.

The House of Commons Welsh Affairs Committee last year said investment opportunities had been missed since the WDA was scrapped.

The Welsh government argued at the time its new model was "more flexible and responsive" and that the WDA had run its course.

The Wales Report will have more on this story on BBC One Wales at 22:25 BST on Sunday 16 June.