Stand out messages from the 2016/17 Draft Welsh Government Budget

People
ViewsDecember 9th, 2015

Victoria Winckler gives a rapid reaction to the 2016/17 Welsh budget.

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The Welsh Government’s draft budget, laid yesterday, is a strange one. It is the first to follow the UK Government’s 2015-2020  spending review, and the last of the current administration. This context means that while there is, in theory, a lot of scope to set a new approach that takes account of the funding environment for the next five years, the political realities limit the appetite and potential for change.

So what are we to make of it?

1. Not as tough as it could have been

While in the long term there is a major reduction in the Welsh Government’s spending, the year on year reduction – a real terms cut in revenue of less than 1% – is more manageable.  The result is that the outgoing Welsh Government has not faced an immediate need to cut most services drastically.

2. But this puts off some big decisions

Most of the Welsh Government’s proposals involve relatively marginal changes – the biggest are an increase of 3.87% in the health budget (fiscal resource Departmental Expenditure Limit) and a decrease of 5.5% in the natural resources budget. Significant sums for sure, but nothing in double digits and most of which can – and will – be managed by snipping and pruning rather than large-scale change.

3. No radical shifts

Perhaps inevitably for an out-going government, there are no big announcements or surprises. No increased childcare provision for three year olds, no change in higher education tuition fees or grants, no scrapping of free provision of things like school breakfasts or swimming.  The ‘business as usual’ approach is disappointing giving the challenges ahead – demographic pressures, a flat-lining economy, rising hardship and poverty, and climate change to name but a few.

4. Core public services are where it’s at

The allegations about the Welsh NHS and Wales’ educational attainment in schools have clearly stung, with both of these services being protected.  The NHS now accounts for nearly 52% of revenue spending and education a further 11%, leaving little room for manoeuvre with everything else.

Welcome though this protection may be, there are still huge pressures from demographic changes and unless the future budget allocations are coupled with requirements to improve outcomes, there is unlikely to be real change.

5. The last spending budget

And last, this could well be the last budget which is only about spending. The implementation of Land Transaction Tax and Landfill Disposal Tax from April 2018 – as well as the prospect of a Welsh Income Tax – mean that future budgets will include proposals to raise revenue as well as spend it.

Victoria Winckler is Director of the Bevan Foundation.  You can support our work by joining as an individual or subscribing as an organisation- simply click here for more information about our members’ and subscribers’ benefits.  

 

One Response

  1. Tim Williams says:

    Another excellent contribution from the Bevan Foundation. I would add only that what seems missing from Welsh Government versions of a budget is income , specifically ideas for generating new sources of income for the government itself. Two examples come to mind. The Welsh Government needs to resists calls to pressurise the UK Government to end the Severn Bridge tolls in due course. While there is a case to review the levels and to use modern technology to enable regular Bridge users and perhaps locals to obtain price incentives, it would be stupid to end tolling. A deal could be done with the UK Treasury to in future – at the end of the current private sector contract – share the income from tolling between the governments. The Welsh Government could then use the guaranteed income streams from the tolls to help forward fund key infrastructure in Wales – for example the vital Valleys Metro project which is struggling to find funding.

    A second new income stream could be ‘value capture’ from the uplift in value of property on or close to the new or upgraded Valley Metro stations. A levy should be charged on all properties within walking distance of the stations as they will see their values rise significantly because of public investment.Additionally, new higher density ‘transit oriented development’ will be achievable at the stations and much of the additional income from such TODS should be shared with the public sector.

    Essentially, we need to see more innovation from the Welsh Government on income generation. Without further income we will see the Welsh Government budget becoming 70 and even 80% given over to the NHS and education with little investment capacity for anything else: a disaster which on current spending trends looks all too likely.

    Saving scarce investment funds is also a good idea. It scares me that the Welsh Government is willing to sacrifice and waste hundreds of millions on adding capacity to the M4 around Newport when that will only worsen congestion. New road capacity always induces demand. Road pricing at peak demand is always a better idea and the only one that actually reduces congestion.The money would be better spent on the Valleys Metro.

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