Welsh Budget: health and councils get more money while other departments face cuts

Martin Shipton

The NHS and local government in Wales will see funding increases while other spending departments will get less money thanks to the poor performance of the UK economy and a real terms reduction in funding from Westminster, the Welsh Government has said in releasing details of its Budget for 2024-25.

Ministers say they have had to make difficult choices, with some programmes facing significant reductions.

Overall the Budget is worth £1.3bn less in real terms than when it was set in 2021, and the Welsh Government insists it hasn’t had an adequate funding settlement for Wales from the UK Government, making it very difficult to meet the extreme pressure on services, business and people.

It says it is still struggling with high inflation, and public sector pay and energy costs remain problematic.

In the recent UK Autumn Statement the Welsh Government received an extra £165m for running services, which related predominantly to non-domestic rates relief.

Funding

According to the Welsh Government, it didn’t provide anywhere near the additional funding needed, so there remains a large gap between the money required and what is available.

Ministers have made decisions based on a set of priorities, with the guiding principle being to provide extra funding for core front-line public services.

They say they have also sought to deliver the greatest benefit for households that have been hardest hit in the cost of living crisis, and have tried to protect jobs wherever possible, working in partnership with other public sector bodies to face the difficult challenges.

The NHS will receive an extra £450m for 2024-25, on top of an additional £425m that was made available in October for the current 2023-24 financial year.

That means that funding for the NHS in Wales will increase by more than 4% for 2024-25 compared to less than 1% in England. But the Welsh Government says that even with this additional funding, 2024-25 will still be a very difficult year for health boards.

The second protected area, local government, funding schools, social services, social care, bin collections and leisure services, will get the 3.1% increase that was promised last year.

As a result of the two protections, especially NHS spending, Ministers have undertaken a “rescoping exercise” to identify where funding can be released from other departments. As a result there are reductions across all other spending areas.

The department facing the biggest cut is Rural Affairs, which is down by 8.97%, and then Climate Change, with a 3.19% reduction and Social Justice, whose budget will reduce by 3.16%.

The big reduction in Rural Affairs is to the rural investment programme. The Basic Payment Scheme, which supports farmers, is being protected from any reductions.

Tax rates

In Social Justice, there are a number of reductions, one of the key ones being to police community support officers – a programme the Welsh Government has no obligation to run, with the police service not being devolved.

There will be no changes to income tax rates because the Welsh Government does not consider it appropriate to raise them during the cost of living crisis when people are struggling financially.

Finance Minister, Rebecca Evans, said: “We have had to take some really difficult decisions to radically redesign our spending plans to focus funding on the services which matter most to the people of Wales.

“After 13 years of austerity, a botched Brexit deal, and the ongoing cost-of-living crisis, this is the toughest financial situation Wales has faced since the start of devolution. Our funding settlement, which comes largely from the UK Government, is not enough to reflect the extreme pressures Wales faces.

“We have been presented with the most stark and painful budget choices in the devolution era. We have reshaped departmental spending plans so that we can invest more in the NHS and protect core local government funding for schools, social care and the other services we rely on every day.

“While the UK Government has not provided Wales with a funding settlement that recognises the impact of inflation, we have made changes to our spending plans and targeted investment towards the public services we all value the most.”

The Welsh Government will continue to provide support to people hardest hit by the cost-of-living crisis, including through the Council Tax Reduction Scheme and a £384m package of support for non-domestic ratepayers, which includes a fifth successive year of relief for retail leisure and hospitality businesses.

A new £20m Future Proofing Fund will be introduced in early 2024-25 for businesses.

The Finance Minister also said the government will be carefully examining whether charges for some services – such as NHS dental care, university tuition fees and domiciliary care – need to be raised to help raise extra funding for public services and higher education, in light of the current budget situation.

Spending

A briefing document issued by the UK Government said: “The Welsh Government bears ultimate responsibility for the decisions that it makes today on spending. It can choose where to allocate its resources in devolved areas as it sees fit, and it is accountable to the Senedd and the people of Wales for those choices. This is an important principle of devolution.

“Total UK Government departmental spending will grow at 3.2% per annum on average over this Parliament. This is not austerity. This compares to planned real terms reductions in total departmental spending in 2010 and 2015. The government has committed to additional funding to protect vital public services, such as £6.1bn in 2023-24 and £8bn in 2024-25 to support health and adult social care services and an additional £2bn for schools in both 2023-24 and 2024-25.

“The Welsh Government are well-funded through the operation of the Barnett formula. The Barnett formula is simple and efficient and has stood the test of time. It is a key part of the arrangements for pooling and sharing risks and resources across the UK. The outcome is that the Welsh Government receives around 20% more per person than equivalent UK Government spending in other parts of the UK. That translates into £3.5 billion more per year on average.

“The Fiscal Framework agreed between the UK and Welsh governments in 2016 added a needs-based factor into the Barnett formula to ensure Wales receives fair funding. This means the WG receives at least 15% more funding per person than equivalent UK Government spending in the rest of the UK, as recommended by the Holtham Commission, and which the Welsh Government agreed was fair. We are currently using a transitional needs-based factor of 105% while Welsh Government funding is above this fair level.

“The Welsh Government also have agreed tax and borrowing powers so they can increase their funding. The Welsh Government controls local taxes and sets Welsh Rates of Income tax while Stamp Duty Land Tax and Landfill Tax are fully devolved. The Welsh Government can borrow to enhance their capital investment, on top of the substantial share of UK funding they receive.”