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Thursday, June 27, 2024

Wales facing cuts whoever wins on 4th July

Wales-online reports that Wales will be left out of pocket if either the Conservatives or Labour win the forthcoming general election.

They say that new analysis by Cardiff University’s Wales Governance Centre (WGC) suggests cuts are likely to hit rail, bus, and road transport as well as business support, communities and regeneration, arts, culture, and sport, and housing and homelessness whoever wins the election:

It is hard for members of the public to get an idea of what party manifestos will mean in real terms. This is especially hard for people in Wales because so much of the money we have here is dependent on what is spent in England.

It is clear from the analysis, put together by Guto Ifan and Dr Ed Gareth Poole, that Wales is in for a really tough time regardless of whether Keir Starmer or Rishi Sunak is sat in Downing Street.

These are the key headlines:

* Both the Conservative and Labour manifestos largely maintain the trajectory of existing UK Government spending plans. If they stick to their manifestos the Welsh Government would face “serious budgetary challenges”. This means it would have to implement further deep cuts to non-protected spending areas to fund increases to health spending.

* These non-protected spending areas include rail, bus, and road transport, business support, communities and regeneration, arts, culture, and sport, and housing and homelessness.

* Under Conservative plans the Welsh Government budget for day-to-day spending would increase by an average of 0.8% per year in real terms from 2024-25 to 2028-29. Assuming the Welsh Government directly ‘passes on’ consequentials from NHS and schools spending in England a further £870m of funding would be required by 2028-29 to avoid real-terms cuts to non-protected areas of spending.

* Under Labour's plans the Welsh Government budget for day-to-day spending would increase by an average of 1.1% per year in real terms from 2024-25 to 2028-29. Again assuming the Welsh Government directly passes on health and education consequentials an additional £248m of funding would be required in 2025-26 to avoid real terms cuts to non-protected spending areas. This gap which would grow to £683mn by 2028-29.

* It is unclear therefore how these plans would fulfil the promise of 'no return to austerity’ under Labour. The additional consequential spending for Wales projected from the 2024 Labour manifesto amounts to just 5% of the consequential spending included in Labour’s 2019 manifesto.

* Welsh Government capital spending (which funds multi-year infrastructure projects such as building schools, roads, and hospitals) will also be cut in real terms under both parties’ manifesto plans. Under existing plans the block grant for capital spending is set to fall by 7.7% in real terms from 2024-25 to 2028-29. The Labour manifesto contains additional investment spending under the Green Prosperity Plan worth some £60m per year for the Welsh Government. This would still however see the Welsh Government’s capital budget falling by 5% in real terms from 2024-25 to 2028-29.

* Crucially both parties’ plans are highly dependent on a swift return to economic growth. Neither the Conservatives nor Labour intend to loosen the current chancellor’s fiscal rules and both parties have also ruled out increases to the main revenue-raising taxes. These pledges will seriously limit the next government’s ability to pump additional resources into public services.

* Moreover the outlook for the public finances is underpinned by Office for Budget Responsibility forecasts for the economy (and for the resulting tax receipts) and these forecasts are significantly more optimistic than those of the Bank of England and the IMF.

Just how the Welsh Labour Government reacts to this will be interesting especially as the BBC reports that it is unlikely that they will be able to pass a budget while Vaughan Gething remains First Minister.

The BBC point out that should ministers be unable to strike a deal with another party then the budget for this year would be effectively rolled over into the next, but with a cut.

Labour does not have a majority in the Senedd and since the passage of a no confidence motion none of the opposition parties are inclined to assist him in keeping his government on track. 

The latest news of Gething flying in an upper class seat to India and staying in a luxury hotel for a two and a half hour meeting with Tata steel when their senior executives were in London only the previous week, is not likely to help his cause either.

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