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Sunday, April 24, 2011

Labour and Plaid's financial failure

Yesterday's Western Mail story about the money that is supposedly being clawed back from the Welsh budget by Westminster is a wake up call for the One Wales Government and underlines how badly served we have been by their Ministers. It seems that when it comes to passing the buck and attributing blame they are in their element, however on delivery the Welsh Government is lagging behind other devolved administrations.

The story focusses on an article written by John Osmond, who is the director of the Institute of Welsh Affairs think tank. He refers to the fact that Welsh Government claims it lost £385m after Chancellor George Osborne and Chief Secretary to the Treasury Danny Alexander decided to end the arrangement under which unspent cash could be carried forward into the next financial year, but points out that in Scotland the amount lost has been restricted to £23m:

Mr Osmond said: “I’ve learned that once again Wales has been outplayed by Scotland.

“In the case of Scotland the loss of what is termed ‘accumulated end of year flexibility’ was limited to just £23m. How could this have happened given the much higher level of public funding, about double, that Scotland receives compared with Wales?

“The sad truth is that the Scottish Government has proved much more agile and streetwise when dealing with the Treasury and safeguarding Scottish interests.”

Over the course of the 2008-09 to 2010-11 Comprehensive Spending Review years John Swinney, the SNP’s Scottish Finance Minister, did a deal with the Treasury that reduced most of the £850m end of year flexibility stock that had existed at the start of the period.

Thanks to this initiative Scotland ended up losing only £23m when the Treasury clawed back the outstanding cash at the time of the 2011 UK Budget in March.

By the time of the beginning of the 2010-11 financial year Mr Swinney had whittled the Scottish accumulated end of year stock down from the original £850m to around £150m.

He then did a further deal with the Treasury to change the size of the Scottish Budget in 2010-11 to allow him to carry over most of the unspent resources into the current financial year. The result was to cushion the Scottish Budget against the spending cuts.

Labour's plans for Wales of course would have cut the Welsh Government's revenue and capital budgets harder and faster than is the case under the UK Coalition. So, given the financial mess they put the country in, why were they not planning for the inevitable and making sure that underspends in-year and planned carry forward expenditure was not kept to a minimum.

The UK Coalition has recognised the special case of the three devolved administrations in its arrangements for carry-forward expenditure, but even they cannot allow for financial incompetence when they need to make in-roads into a £109 billion deficit and a £800bn debt.

Unspent money was always going to be a natural target for cuts, no matter how much pseudo-nationalist rhetoric the Finance Minister indulges in. She should have realised that and planned accordingly some time ago.
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