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Saturday, January 04, 2014

Labour's planned cuts threaten Welsh Government budget and our NHS

This morning's Western Mail reports on an article by David Phillips, a senior research economist at the Institute of Fiscal Studies, that speculates on the impact of cuts by a future UK Labour Government and the impact they will have on the Welsh Government's budget (not yet on-line).

In particular Mr. Phillips highlights the threat by Shadow Chancellor, Ed Balls that no area remains sacrosanct, including the English health service, which is likely to have a disproportionate impact on services on the our side of Offa's Dyke.

What the paper does not make clear is that the current UK Coalition Government has ring-fenced spending on the English Health Service and that as a result, when combined with extra UK spending on education, Wales has remained relatively insulated from the cuts.

It is certainly the case that in cash terms the Welsh block grant has continued to increase, that in real terms it has not declined as much as many English departments and that the cuts to the block grant have been less deep and slower than envisaged by the previous Labour Government and Alistair Darling's plans as set out in his 2009 budget.

This is due to the way that the Barnett formula works. The vast majority of expenditure by the Welsh Government is on Education and Health. They receive 5.9% of all monies spent in England on these areas. It follows therefore that any cut to Education and Health will have a disproportionate impact on Wales, just as the decision to protect these departments by the current Government, will be beneficial.

The point made by David Phillips is that if Ed Balls follows through on his threat to cut the English Health budget then it will be disastrous for Wales. He suggests that such a decision by a future Labour Government will leave the Welsh block grant 9% lower in 2017-18 than it is today, with the Welsh Government having to cut other services by 15% just to stand still.

He adds: "Unfortunately, even when its budget starts growing again, increasing spending on the NHS at a rate required to meet the projected rises in costs and demand would mean very difficult choices elsewhere in the budget, unless those pressures can be ameliorated."

The lessons are very clear: The present UK Coalition policies of protecting health and education are benefiting Wales and offering some relief from necessary austerity measures; a future Labour UK Government that does not have such clear priorities and instead cuts across the board will be disastrous for Welsh services, and the NHS and schools in particular; and a proper needs based funding formula together with tax varying powers is vital if we are to break out of this symbiotic relationship and actually have the freedom to start making our own decisions.
If we receive 5.9% of all monies spent on education and health in England, how much of this money is not spent on education and health ?

I think all of it, though it will take some complex research to prove that. Being devolved we have the choice how we spend it of course.

Of next year's 13.385bn revenue budget 81% is spent on health (£5.377bn), education (£3.569bn) and local government (£1.954bn). Local Government spends more than half its money on education and social services.
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