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Despite the recent vote in favour of abolition of the LCO process, a great deal of the prosperity of Wales remains in the hands of the Westminster government. Taxation and benefits remain non-devolved matters, and decisions that will effect more people in Wales than many of the areas that are devolved. For these reasons and more, today’s budget is self-evidently extremely important.
The headline news is that the office for budget responsibility (OBR) has downgraded the growth forecast, and raised its predicted unemployment figures for the year. Unsurprisingly, this will mean the deficit will be higher than first thought, as the total spent on benefits rises and the total taken in taxation falls. It is an appropriate time to remind people that the nation’s finances are not the same as a household budget.
The downgrading of growth and employment forecasts provide further evidence that cuts to public spending are not achieving their desired effect of balancing the books. Public sector workers facing uncertain times ahead are predictably cutting back, and private sector firms are facing lower demand for consumer goods as a result. Far from being rescued from the danger zone, the cuts have actually placed us in it. It is also worth remembering that the OBR is only producing forecasts for the whole of the UK, as a nation with a smaller private sector and bigger cuts to come, it is likely that the prospects in Wales are far worse.
The first priority for the incoming government in Cardiff thus needs to be to promote employment and to examine ways to protect the vulnerable from the rising cost of living. Unfortunately there is very little in today’s budget that offers some hope that the Welsh economy can be kick-started. The gamble of the budget is that the private sector will simply do the work of repairing the economy.
But hey – fuel is now cut by a penny. So at least it will be mildly cheaper to get to the job centre.