Chancellor cuts Welsh government budget by 2%

The Welsh government's budget will be cut by 2% after inflation in 2015 as part of Chancellor George Osborne's spending review.

Mr Osborne said the revenue budget would be set at £13.6bn and UK ministers would respond to the Silk commission on assembly powers shortly.

He said he would then give details of "impressive" M4 relief road plans.

Welsh ministers welcomed news on Silk and the M4 but warned the cuts would have a "negative impact on all of us".

The Wales Office, the Whitehall department which represents Wales in the UK government, has agreed a cut of 10% in its running costs.

The chancellor was setting out spending cuts for 2015/16 forced on him by slower than expected economic growth and deficit reduction.

Labour has said it will stick to the plans if it wins the 2015 election.

The Welsh government budget cuts are part of £11.5bn savings from the UK government's overall spending plans of £740bn.

The Scottish government and Northern Ireland executive have also had their budgets cut by 2%.

There is a slight increase of 0.3 per cent to the Welsh government's capital budget from £1.4bn to £1.5bn.

Mr Osborne has twice highlighted the need for a M4 relief road around Newport.

Supporters of the scheme were expecting him to give it the go-ahead this week but may have to wait a little longer.

Questions remain over how a project costing up to £1bn will be paid for.

'Priorities' warning

Welsh Secretary David Jones said Welsh government day-to-day spending had been "largely protected" because of the way the funding formula for Wales reflected "the protections afforded by this [UK] government to education and health [in England]".

"We have also heard today that this government will freeze council tax in England for the next two years and will reform its funding to social care," he said.

"Clearly, decisions on how the Welsh government spends its budgets are rightly, a matter for the Welsh government.

"However, I would urge the Welsh government to note these measures very carefully and consider how they make their allocations in line with their own priorities."

The Welsh government's finance minister Jane Hutt welcomed the prospect of news about devolved powers and an M4 upgrade.

But on the budget reduction she said: "With £11.5bn of UK government cuts, this was always going to have a negative impact on all of us."

In a statement she added: "We have been open about the very stark reality of the difficult financial decisions that lay ahead as a result of the financial challenges we are facing.

'Pain'

"These decisions are not made any easier after today."

She added that overall the Welsh government's revenue budget in 2015-16 would be £280m lower in real terms than in 2014-15, and £1.68bn lower than 2010-11.

Labour's Shadow Welsh Secretary Owen Smith said Wales had "already taken more pain than other parts of the country, with real wages falling £1,600 since 2010".

"The further cut announced today will mean that the Welsh government's budget is down by more than 10 per cent since the coalition came to power," he said.

"Families and businesses in Wales need action now to get growth back into the economy, generate jobs and protect living standards."

'Political trap'

Plaid Cymru insisted it was the party which offered the "only hope" for "struggling communities and businesses in Wales".

The party's Treasury spokesman Jonathan Edwards MP said Mr Osborne laid a political trap for Labour that they had "fallen into hook, line, and sinker" by accepting austerity cuts if they formed the next government.

"This leaves the people of Wales with absolutely no difference between Tory austerity and Labour austerity."

S4C is now mostly funded from the BBC licence fee

But Ceredigion MP Mark Williams, Liberal Democrat Welsh affairs spokesperson at Westminster, said the spending round "delivers Lib Dem priorities on investment and improving our public services while making responsible choices to deal with the financial problems Labour left us".

"A 0.3% real terms increase to capital allocations will allow the Welsh government to focus spending on infrastructure projects and support growth in the economy," he said.

Meanwhile the UK government has confirmed it will not reduce its cash funding for Welsh-language television channel S4C under the spending review.

But it will mean a reduction in real terms after inflation is taken into account.

S4C received £6.7m from UK Department for Culture, Media and Sport in 2013, but is now mostly funded from the BBC licence fee.

Huw Jones, chair of the S4C Authority, said the channel was "very glad to understand that the UK government's financial commitment to S4C is to continue".