Who benefits from public spending?

As the Welsh Government’s draft budget is scrutinized by the Senedd, Victoria Winckler, Director of the Bevan Foundation, says its time to look at it differently.

The Welsh Government’s draft budget sets out how it intends to spend the £22 billion allocated to it by the UK Government and raised through devolved taxes.  Despite the best efforts of the Welsh Treasury to communicate the budget in layperson’s terms, it is a dry read.

Yet it is something that matters to us all. 

How much is allocated to different services such as health or education is one of the main drivers of whether we can see a GP, get a decent education for our child or enjoy our local park.

Effective scrutiny by Senedd Members and by the wider public is therefore crucial. If we want more money spent on something and less on another, there is an opportunity to have our say.

Most people and politicians look at the budget in terms of specific services. How much for health? Has spending on the economy been cut? What’s available for further education? The budget goes through the different subject committees of the Senedd, reinforcing this service-based approach.

But there’s a different way to think about the budget

When I gave oral evidence to the Senedd’s Finance Committee, as always they asked me about whether the budget would help to reduce poverty. This year, I was pleased to be able to say that it would make a tangible difference. The funding for universal free school meals for primary children would benefit many pupils in low-income families but who were not previously eligible. The increased budget for the Discretionary Assistance Fund would support people in crisis. And the allocation to social housing, while not enough, would help to increase supply.

But these were specific actions I could point to. What nobody can tell is how the Welsh Government’s  spending plans affect people on low incomes.

This is important because some services are used more by people on high incomes whereas some are used more by people on low incomes.  An obvious example is public transport – people on high incomes tend to use the train whereas people on lower incomes tend to use the bus.  A decision to spend more on trains than buses therefore means that people on higher incomes benefit more than people on lower incomes.

The same approach can be taken when looking at the overall pattern of expenditure.  Yes, spending on health is of potential benefit to us all, but if some people use the NHS more than others then those groups gain most.  

This analysis of ‘who benefits’ is called a ‘distributional analysis’ and is most often seen in relation to tax and benefit announcements by the UK Government. But it can usefully be used for other spending plans too.

One of the most useful examples is an analysis by the Equality and Human Rights Commission of the impact of cuts in public spending on different groups.  The spending plans have since been superseded, but the same approach could usefully tell us who really benefits from the Welsh Government budget.

We’re pleased that arrangements are being made to introduce a distributional analysis in Wales. When questioned in the Finance Committee by Rhianon Passmore MS following our evidence, the Minister for Finance said that:

We’re already exploring the use of distributional analysis as part of our budget improvement plan, and we’ve looked to refine and extend our distributional impact model for analysing public spending in Wales

We look forward to seeing the outcome of that analysis and to exploring how it can inform future public spending plans.