THE curtain fell yesterday on years of inflation-busting budget increases for the Assembly, with the Treasury signalling three years of belt- tightening for ministers in Cardiff Bay.
The Assembly Government’s budget will rise from £13.6bn in 2007/08 to £15.8bn in 2010/11, average year-on-year rises of just 2.4%.
Ministers admitted the settlements were “challenging” – in contrast to the doubling of the Assembly budget between 1999 and 2006 – but insisted they compared favourably with the 2.1% rise in across-the-board UK public spending.
Plaid dismissed the announcement, made in Chancellor Alistair Darling’s Comprehensive Spending Review as “the worst financial settlement for Wales since devolution” and accused him of spinning the figures.
There were also complaints that, due to a re-calculation of the WAG budget for this year, it had dropped from £13.8bn to £13.6bn. Plaid predicted that attempts would be made to re-coup this “missing £200m”.
The reduction was due to changes in the budgets of other government departments – with the Barnett formula meaning the WAG budget also had to be cut.
Pressure will now shift to the Plaid-Labour coalition in Cardiff Bay, which needs to finalise its own budget by the end of the year. The coalition agreement signed by the two parties in the summer contains numerous ambitious spending pledges, and taut negotiations will now lie ahead.
Welsh Finance Minister Andrew Davies said the settlement would be particularly tough in the 2008/09 financial year, with just £700m extra for the WAG to spend.
“Our challenge is to build on this substantial progress and continue to deliver noticeable improvements in Welsh public services, while spending is growing at a slower rate across the UK,” he said.
Mr Davies said he would “finalise some technical issues with HM Treasury” and draft the Assembly Government budget in the coming weeks.
Welsh Secretary Peter Hain said, “This is a good deal for Wales... Wales already receives more than £1,000 more funding per head than England. For the past 10 years Wales has enjoyed an extraordinary and unprecedented period of continuous year-on-year public spending increases, with record levels of economic investment and employment.”
Mr Hain said other elements of Mr Darling’s spending review and the Pre-Budget Report, also unveiled yesterday, would benefit “Middle Wales” – the aspirant middle class, senior Labour figures believe the party needs to target.
Raising the inheritance tax threshold to £700,000 per couple by 2010 would be welcome in Wales after a period of rising house prices, he said, while economic growth, predicted to be 3% next year, would benefit everyone.
But Plaid Cymru MP Adam Price said the money available for Welsh ministers was “the worst since the days of William Hague”.
He said, “The Chancellor’s figures are misleading. He said that UK spending will grow by 1.9% over the next three years, and that Wales would see a 2.4% increase in line with the Barnett formula, but the figures have in fact been massaged. The £16bn the Chancellor talked about for Wales is in fact £15.8bn, that’s £200m lost as a consequence of the Government shifting the baseline.
Wales’s increase actually lies at 1.8%. The knock-on effect of this is that the people of Wales will be £700m worse off than they should have been had the Government stood by its budget promise.”
The Welsh Local Government Association said the settlement “signals difficult times ahead for the public sector in Wales”. It has called on the Assembly Government to prioritise local government in its forthcoming budget.
Derek Vaughan, leader of the WLGA and Neath Port Talbot Council, said, “[This] announ- cement confirms local government’s fears that the downward trend in public expenditure of recent years is accelerating.
“Since 2000/01 the Assembly Government’s budget has risen by 81% but local government’s by only 49%.”
He added, “[Councils] can only squeeze so much from the system and we need to be realistic about what is possible in this environment.”
The WAG budget could have been even tighter, with Mr Darling’s decision to increase health and education spending in England largely accounting for the rise in funding for the devolved administrations.
Spending will rise even more slowly in Scotland and Northern Ireland, the Treasury said.