PUBLIC spending cuts totalling more than £600m could be on the way in Wales if the UK Government ditches plans for big increases in England’s NHS budget, it has been claimed.
Plaid Cymru’s economic adviser Eurfyl ap Gwilym says a Government minister’s refusal to confirm that earlier spending announcements will be honoured may have serious consequences for the Assembly Government budget over the next three years.
Last week Assembly Finance Minister Andrew Davies delayed publishing a draft budget for 2008-09 because of uncertainty over the size of the block grant from the Treasury.
The UK Government’s Comprehensive Spending Review (CSR) covering the next three years is due to be revealed on October 17, although it may be released earlier if a general election is called next week.
Decisions in England over health and other spending are crucial because they have a direct impact on how much money comes to Wales under the Barnett Formula.
Mr ap Gwilym said, “Local authorities are being given indications that this budget round will be a very tough one, but effective planning is being held up due to the delays in publishing the CSR.”
He said that based on earlier UK Government estimates, it had been possible to calculate that the Assembly would have a 2.6% increase in its block grant in real terms. But, he said, it now appears Labour may be reneging on its commitment to NHS spending growth. This would have a significant knock-on effect in Wales, as about 40% of any growth in the Assembly block grant is related to growth in NHS spending in England.
Mr ap Gwilym said, “The figure for NHS spending growth in England used by Plaid Cymru in its projections was 4.4% per year in real terms. However, when the Chief Secretary to the Treasury, Stephen Timms, was asked by members of the House of Commons Treasury Committee whether Labour would keep to that target he said this ‘will not necessarily be the case’.
“Despite further questioning from members of the Treasury Committee, Mr Timms refused to be drawn further, but it was clear that he was preparing the ground for a lower level of growth in NHS spending.
“If Labour honours its NHS spending pledge, then the real growth in the Welsh block grant should be around 2.6%. But if NHS spending in England grows by only 3.4%, then growth in the block grant could be around 2.3% only. If NHS spending in England grows by only 2.4%, the block grant’s growth could be as low as 1.9% per year in real terms.
“In real money terms these latter scenarios represent shortfalls of £260m and £605m over the remaining three years of the Assembly’s current third term.”
Explaining why he thought Labour may be contemplating cutting its spending commitments to the NHS in England, Mr ap Gwilym said, “After a good start in the late 1990s, Labour’s management of the public finances are getting into increasing difficulties.
“Despite massive tax increases and increased borrowing there is a budget deficit of around £35bn a year which means the reduction of total public debt that took place in the late 1990s and early 2000s is now being reversed with public debt increasing again.
“The cost of servicing this debt is increasing for two reasons: the total debt is getting higher every year and the interest rate that has to be paid to service the debt is now increasing rapidly, with five increases in the last year.
“Labour’s mismanagement of the public finances through a combination of too rapid a growth in public spending and higher borrowing despite increased taxation is finally coming back to haunt them. Given these problems it may not be surprising that the author of these misfortunes, Gordon Brown, is contemplating a dash to the polling booths before the full consequences of his mismanagement of the public finances become apparent to the electorate later this year and in 2008.”