Welsh Government outlines budget to tackle ‘perfect storm’ of financial pressure

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The Welsh Government has published what it is calling a budget for “hard times” in the face of a “perfect storm of financial pressures”.

Finance minister Rebecca Evans announced on Tuesday how the Government is planning to spend the country’s cash over the next two years – saying adjustments had been made to “protect frontline public services as far as we can”.

Hundreds of millions of pounds of extra money is being put towards such services, including £165 million for the NHS, and £70 million to ensure social workers continue to receive the real living wage.

Local government is to receive £227 million to help fund services such as schools, while education will also get an additional £28 million to improve standards in schools, support children whose families are on lower incomes, and help children and young people with additional learning needs.

Another £18.8 million has been allocated for the Discretionary Assistance Fund, which provides lifeline emergency payments to people facing financial hardship.

A support package for businesses worth £480 million was announced on Monday, which includes a move to increase business rates relief from 50% to 75% to match the support recently introduced in England.

Other priorities have seen £40 million go towards supporting public transport and the Government’s aim of reaching net-zero by 2050.

Welsh Government announces three-year budget
Rebecca Evans said the budget is ‘one of the toughest since devolution’ (PA)

Ms Evans said difficult decisions had been made to reprioritise funds, warning that inflation had reduced the Government’s spending power.

“This is a budget in hard times, which will help to protect frontline public services as far as we can in the face of a perfect storm of financial pressures, while also providing some extra help to those most affected by the cost-of-living crisis and supporting our economy through the recession,” Ms Evans said.

“This has been one of the toughest budgets since devolution. It is being delivered as the UK economy is once again in recession, following a decade of austerity, Brexit and the pandemic. Inflation is at a 40-year high and energy costs are soaring.

“Inflation has eroded the spending power of our budget but not our ambition. We have taken very difficult decisions to make sure all our resources are used to help support people, businesses and services through the tough year ahead.”

The Welsh Government said that due to inflation, its £23 billion budget is worth up to £1 billion less next year than when it was originally announced, and up to £3 billion less over the three-year spending review period from 2022-23 to 2024-25.

Ministers have said the budget aims to help those impacted most by the cost-of-living crisis (PA)

Chancellor Jeremy Hunt announced in his autumn statement last month that the Welsh Government was to receive an extra £1.2 billion as part of a package of measures to stabilise the economy.

The Welsh Conservatives said the money provided by Westminster should give the Labour Welsh Government the opportunity to “fix the structural issues in Wales, from reducing Wales’s record waiting lists, to properly funding our education system, to unlocking the Welsh economy”.

Welsh Liberal Democrat leader Jane Dodds said she recognised the difficulties in setting the budget given the energy crisis and “Liz Truss’s disastrous mini-budget”, but said she would have liked to have seen more money for health and social care – particularly NHS dentistry – local government and for an emergency insulation programme.

Plaid Cymru called on ministers to use their powers to increase tax to relieve pressures.

Wales Fiscal Analysis (WFA), a research body within Cardiff University’s Wales Governance Centre, calculates potential losses due to inflation, even after additional funding, at more than £800 million in 2023-24 and £600 million in 2024-25.

The WFA has suggested that if the Welsh Government used its devolved tax powers to increase rates of income tax by 1p, it could increase its budget by 1.4% next year and the year after.

The Welsh Government is under pressure from unions to increase the pay of public sector workers, with nurses set to strike on Thursday.

But health minister Eluned Morgan and First Minister Mark Drakeford have repeatedly said they cannot afford to offer more money than is currently on the table without more money from the UK Government.

In July, following the recommendation of the NHS pay review body, a flat pay increase of £1,400 was announced for nurses, cleaners, porters, healthcare support workers and healthcare professionals, on most Agenda for Change pay bands.

Other pressures include the increasing cost of social care, homelessness provisions, and public transport – which has become more costly due to lower demand.

The scrutiny of the budget will begin on Wednesday and the Senedd will have until February 6 to gather evidence before it is debated the following day.

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