Another four tough years for Welsh public services

Although less than feared, there will be continuing downward pressure on spending and tough choices ahead for public services in Wales following today’s Spending Review, says a think-tank looking at the long-term challenges for public services in Wales.

Despite the knock-on benefit to the Welsh Government budget from the extra £8 billion NHS spending in England, the Welsh Government budget will fall in real terms over the next four years.

The key messages from Wales Public Services 2025, an independent programme hosted by Cardiff University’s Business School, are:

  • the Welsh Government’s Resource Budget, which pays for the day-to-day running of public services, is due to fall by 4.6% in real terms between now and 2020;
  • this follows substantial real terms cuts in the Wales resource budget between 2010-11 and 2015-16;
    although there will be pressures on the Welsh Government budget for the immediate year ahead, the big challenge will be for whichever Welsh Government is elected next May;
  • the implications of the Spending Review for police forces in Wales will only be clear when the police settlement is announced on 16th December – the commitment is to maintain core funding for individual forces in cash terms. There was a real terms cut of 19% in government grant to police services in Wales 2010-15;
  • Welsh Government capital spending will fall by 2% in real terms although capital spending in Wales would benefit from a Cardiff City Deal, supported by in principle by the Chancellor, and rail electrification;
  • the announcement of a ‘Barnett floor’ will be widely welcomed in Wales although its effect may be more for the long-term.

Among other announcements, Wales will receive a share of the Apprenticeship Levy on big employers.

A number of announcements apply only to England – such as the free child care entitlement for three and four year-olds from 2017 and the acceleration of shared home ownership schemes. It will be for the Welsh Government to decide its policy on these.

The reversal of the tax credit cuts has removed one fear for low income families but the extension of the housing benefit cap could have significant implications for social rented housing and will need further analysis.

Michael Trickey, Programme Director Wales Public Services 2025, said: “ Key issues include how far the Welsh Government will match the year-on-year increases announced in NHS England’s budget and how far that will squeeze spending on all other services. Schools and social services have been broadly protected so far in Wales although real terms spending is starting to fall. Experience so far suggests that it is services such as parks, libraries, culture, leisure, waste management, buses and support for local groups where cuts could be most visible.

“The Chancellor will be hoping that his demand for a 1% ceiling on public sector pay increases, following the freeze he announced in 2010, and historic low inflation will ease the pressures on budgets. But pressures on pay and employment costs are building and there are concerns about the potential impact of the widely-welcomed new National Living Wage on some services, particularly in the care sector. Public sector employment is falling in Wales and we should expect it to fall further.”

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