Wales budget: Pubs and shops face tax hike to prop up NHS

Business rate relief for pubs, shops and restaurants will be cut from 75% to 40%

Pubs, shops and restaurants will see their business rates go up as part of plans to put more money into Wales' struggling health service.

The plans include a fresh round of public spending cuts.

While health spending is increasing, every other department faces real terms cuts, with rural affairs worst hit.

Officials say ministers are prioritising frontline services, including the NHS and councils.

Arts and culture bodies and Sport Wales will see their funding cut by about 10%.

Museums could have to charge visitors, while the Welsh government is also considering increasing tuition fees and charging for dental and social care.

There are also cuts to spending on police community support officers (PCSOs) and apprenticeships.

Even in the health department, cuts have been made so money can be diverted to frontline NHS services.

Finance Minister Rebecca Evans said: "We have had to take some really difficult decisions to radically redesign our spending plans to focus funding on the services which matter most to the people of Wales".

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The Institute for Fiscal Studies' David Phillips said the budget "clearly prioritises core NHS services - making very tough choices across a range of other services".

As part of Welsh Labour's £21bn budget for the 12 months after April, business rate relief for pubs, shops and restaurants will be reduced from 75% to 40%.

The Welsh government said the discount, which dates back to the pandemic, was "never intended to continue indefinitely".

It remains at 75% in England, where business rates are set by the UK government.

The Welsh Independent Restaurant Collective warned the move could be a "final nail in the coffin for many independent businesses".

Natalie Issacs of Bar 44 Group, which runs restaurants in Cardiff and Bristol, said the increase would be between £500 and £1,000 a month, "putting us at a direct disadvantage with businesses across the border".

The NHS is receiving extra money in the Welsh government budget

Tuesday's announcement comes on top of the cuts that were already made in October to support the NHS and Transport for Wales railway services.

Ministers said there were some things the government would no longer fund.

The Welsh government said the money it received from the UK government was not enough to cover rising costs - particularly for wages in health and education.

Ahead of the budget, Conservatives accused the government of wasting "millions" on "vanity projects" such as more politicians, while Plaid Cymru said "everything possible must be done" to protect public services.

The budget was published while the Senedd is in recess, meaning politicians did not scrutinise the spending plans in public on Tuesday.

Senedd members will vote on the plans in the new year.

Conservative Welsh Secretary David TC Davies said: "If the UK government tried to bring out a budget in the middle of a recess there would be absolute uproar and rightly so."

He also rejected claims the Welsh government was not being given enough funding by Westminster, saying the Welsh government provide a "lower standard of service" in health and education when it receives more money than England per head.

Where do the cuts fall?

Budget documents show every minister has had to make reductions.

When adjusted for the Welsh government's measure of real terms - which takes inflation into account - all departments apart from health have less to spend.

That includes finance and local government, despite councils getting an extra 1.5% in real terms.

It means some sectors are facing large decreases in their funding, including the National Museum and Arts Council Wales whose cash support will fall by around 10%.

Cadw, the body responsible for safeguarding Wales' historic places, will lose £2m out of their budget - a cut of more than 20%.

Rural affairs is taking the biggest hit. After inflation, the day-to-day rural affairs budget will fall by more than a tenth.

While the basic payment scheme for farmers was protected, business support was not.

Pain to come in the NHS

The Welsh NHS is contending with record high waiting times and growing wage bills, while junior doctors are due to go on strike next month.

The health service will still face difficult decisions, despite funding being topped up £425m this year and £450m in the coming year.

Overall health spending will be £11bn by 2024/25 - more than half of the government's entire budget.

But within that, some things are being cut back, including funds for drug and alcohol misuse, mental health treatment, obesity and smoking prevention.

Although funding has been "redirected" across the government, the Welsh government said "this still means that health boards will face some challenging decisions to manage within their individual budgets".

Difficult decisions in councils

Rebecca Evans warned of difficult decisions for councils, despite a small uplift in their core funding.

Wales's 22 local authorities will find out their individual settlements on Wednesday.

"That said I think we have gone as far as we possibly can in terms of re-prioritising across government," the finance minister said.

The uplift of 3.1% was in line with what councils were expecting and they had already warned it could lead to cuts to services, job losses and increases in council tax.

The Welsh Local Government Association said councils faced a shortfall of £432m.

Its finance spokesperson, Anthony Hunt, warned the impact on communities would likely be "profound".

Welsh tuition fees could increase

Tuition fees and dental costs might also increase because of the "extreme pressure" on the Welsh government's budget.

Ministers said they would "carefully consider" whether they could bring in extra money by charging more for services.

No decisions have been taken and ministers said they would consult on proposals before making changes.

Meanwhile, a total of £7.5m of funding was cut from PCSOs.

Welsh Labour had promised to fund 600 extra officers at the last Senedd election in 2021.

Carmarthenshire Labour opposition leader Rob James said he "sincerely hoped this cut is reviewed for the final budget".

"We need to be prioritising funding for our key pledges not the cooperation agreement Plaid Cymru or lesser publicised policies in the manifesto."

Ms Evans said PCSOs were "actually the responsibility of the UK government", which funds the police.

But she admitted it would have an "impact on our manifesto commitment".

The Welsh government will also miss a manifesto target to provide 125,000 apprenticeships during the next Senedd term by 15,000, after funding was reduced by £5m.

Chief executive of further education group ColegauCymru, David Hagendyk, said the cut was a "devastating blow to apprentices, employers, and communities".

Rebecca Evans says council services, such as gritting, will be prioritised

Reaction

Welsh Conservative Senedd leader Andrew RT Davies said it would be the "biggest shot in the arm" if business rates were reformed.

"What the Welsh finance minister and the Welsh Labour government have highlighted here is that they don't care about Welsh businesses," he said.

Plaid Cymru's Rhun ap Iorwerth said the budget was "unsustainable and will have a serious long-term impact on hard-working people across Wales".

He said the UK government's funding deal was "unfair" but said "serious questions must also be asked of the way Labour spend public money".

Plaid Cymru is likely to allow the budget to pass when Senedd members vote on it next year, as part of its co-operation deal with the Welsh government.

Labour Finance Minister Rebecca Evans said: "After 13 years of austerity, a botched Brexit deal, and the ongoing cost-of-living crisis, this is the toughest financial situation Wales has faced since the start of devolution.

"Our funding settlement, which comes largely from the UK government, is not enough to reflect the extreme pressures Wales faces."

What is the Welsh government budget?

The Welsh government funds services run from Cardiff rather than Westminster.

That includes education, health, agriculture, bus transport, some rail, arts and culture.

It also supports local councils, which fund social care, schools, leisure centres and refuse collection.

Where does the Welsh government get its money from?

Most Welsh government money comes from a UK government grant, with a small amount from taxes.

The Welsh government has complained that the money is not meeting the pressure of inflation.

For its part, the UK government said the Welsh government was "well-funded".

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