In praise of Welsh budgets

Desmond Clifford

Next year’s Welsh budget is published in draft next week. Slightly to my surprise, I have a new enthusiasm for Welsh budgets, fuelled by increasing contempt for the ludicrous Westminster version.

News organisations dignify the growing absurdity with reporters in Downing St, live vox pops from Huddersfield, and pointy heads explaining fiscal headroom.

At day’s end, someone has worked out that a family in Redcar is £1.20 a week better off if they don’t drink, smoke or switch the heating on (until even this is wiped out by raised interest rates a week later). What any of this has to do with good government is a mystery.

Welsh budgets aren’t like that. A draft budget is published outlining spending plans for next year and any adjustments to Welsh tax measures. The budget vote will be towards the end of February, three full months later. Senedd Members have ample opportunity to discuss it with constituents and to quiz Ministers, who will need to explain, defend or refine.

The Welsh Government needs a deal with at least one party, probably Labour, to secure a majority. In presenting her draft, Finance Minister Elin Jones will leave a decent sum of money “unallocated”. This is the money available for negotiation. In effect, the government says, “There’s £X million – what would you like to do with it?”

The negotiating party will press demands. They will aim, ultimately, to show voters what difference they made. This is how a well-functioning Senedd works.

Plaid Cymru in opposition were very good at it, and Labour in government very practical. No party has ever commanded a majority. Compromise is necessary and ensures a greater share of the electorate is represented in key decisions.

At Westminster, an overall majority carries the day regardless. The Welsh Government simply can’t go it alone, as Plaid Cymru discovered over the summer with the supplementary budget.

Both Labour and Plaid Cymru overplayed their hands somewhat. Both, in fairness, were adjusting to May’s drama and their role reversal. No lasting damage was done.

My preference would be a budget built on a progressive alliance including Labour, Lib Dems and the Greens. It’s in the interests of progressive parties for voters to see a clear delineation in the Senedd between them and the right wing. In Labour’s small group there are those who think making life difficult for Plaid is a strategy. This is a tactic, not a strategy, and will win back not one single vote. A progressive bloc, on the other hand, positions parties on the correct side of the aisle – across from Reform and the Tories.

The budget is the Senedd’s most important piece of business. It’s how the Welsh Government furthers its priorities. They will have to cut spending in some areas to boost manifesto commitments. To govern is to choose, as they say. Nobody likes it, but this is what “tough decisions” look like.

The Welsh Government has already signalled its intention to end funding for tree planting in Uganda. Although it’s a sad decision, I’m encouraged by the government’s willingness to take it. It is manifestly not a devolved activity, and no development funding is provided in the Barnett formula.

Although it’s not much, the money subtracts from its intended purpose in Wales. The UK Government, which has full responsibility for foreign development aid, spent something like £13 billion last year. The Welsh Government’s few hundred thousand pounds in Uganda is not strategic and is hard to justify in tough times.

National park

The government also decided, sensibly, to shelve Labour’s half-hearted ambitions for a fourth national park in the north. They’ll have to scrap other, bigger projects too if they want to release money for expanded childcare and other commitments. They shouldn’t feel squeamish about it. Any fool can spend the government’s money. The real job of a treasury is to contain spending and direct it towards the government’s chosen priorities. Governments are prone to start spending on projects which no one afterwards ever thinks to switch off. Plaid needs to find “switch off mode” to do justice to its own plans.

The Senedd’s budget approach is way better than the farce played out at Westminster. Chancellor Healey failed even to address the reason for his resignation from Starmer’s front bench, though he could hardly resign again in disgust with himself, could he? As for Burnham, his stated intent is to reverse 40 years of Thatcher liberalism. Instead, we get cheaper gherkins and an energy bung to 20 million households – too little for those who really need help and unnecessary for those who don’t.

Tricks

In modern budgets, HM Treasury indulges in all manner of tricks it would laugh out of court if presented by another department in the normal course of business. Chancellors are, in effect, gifted a fund which they use for political gimmicks rather than the national interest (having first convinced themselves these are the same thing).

This is roughly how it works. The UK Government will collect revenue, say £1.3 trillion this year, and plan to spend around the same amount. The pointy heads invented something called “headroom”, a notional sum which is the supposed difference between revenue collected and money committed. If the “headroom” is, say, £10 billion, this becomes, effectively, the Chancellor’s special fund – money he/she can spend on pet projects designed to boost the government’s political ratings.

£10 billion is a tidy sum but a minuscule percentage of the overall UK budget. Yet the political debate focuses very intently on the goodies bought with it. The other 99.2% of expenditure is largely ignored. It’s a mystery to me, but the entire political community in Westminster, and most of its journalists, buy into this preposterous charade as though it has anything to do with the country’s economic performance.

It’s mad to trust everything to the stop-start stutter of an annual process. It would be better, surely, if a government outlined its approach to fiscal management and spending at the beginning of its term of office – and then stuck to the plan. If that was the case, the budget could be replaced with a 15-minute technical report on the evolving technical data.

Bizarre

No space here to talk about the Barnett formula, the bizarre recipe used to determine an amount of money allocated to Wales. One of its impacts is to freeze things as they are and another is to discourage serious investment in Wales.

The way the Welsh Government is financed makes it extremely difficult to plan large-scale infrastructure projects in Wales. Such plans would never occur to the Treasury in any case – they think Wales is a joke, and our MPs mostly do little to disabuse them of that.

Andy Burnham thinks the Barnett formula is useless too. He says so in his book Head North. It no more serves northern England than it does Wales. So it’s not unreasonable to ask – what’s he going to do about it now that he can?

There are tremendous forces at work in politics to keep things as they are. I want to give Burnham the benefit of the doubt in the hope he’ll yet become the change guy. But there’s a nagging doubt. Is he for real, or has an unlikely fate unfolded around him just sufficient to feed a political fantasy which must inevitably dim and disappoint? Does he wake in the night and wonder how this magical mystery tour came about?

Similar questions hover over the Senedd. Did May herald profound change or simply new management with better TikTok? It’s early days, but I worry Plaid is being cowed by the bureaucracy. They need to grasp just how much elbow is required to shift the dial. Ministers who think the world will change around them just because they’ve said something publicly and issued an instruction are misguided. They must keep repeating themselves, keep driving the horses – and then do it all again.

Untouchable

Let’s see what the budget offers. Plaid will have less money than ambition. It’s politically impossible to trim the NHS but it seems equally impossible to improve efficiency.

Education is also untouchable. Cuts to culture would undermine the whole point of a Plaid government. The third sector was expansive under Labour and is the only real area where savings could be made to finance other priorities. The government has pre-announced a few small-scale cuts that may signal toughness to come.

We get to see it all in good time and can challenge it if we want to. It never occurs to the UK Government to learn from others, but they could do worse than look at how devolved Wales does its budget business.