Implications of the Spending Review for Wales – WPS2025 Briefing

On Thursday 10th December the PPIW team attended the Wales Public Services 2025 briefing. PPIW’s Deputy Director Dan Bristow reports on what was learnt.


 

Analysis of the implications of the spending review for Wales is hard to come by, so it was great to be able to attend a Wales Public Services 2025 briefing last week, with presentations from Michael Trickey (WPS2025) and Victoria Winckler (Bevan Foundation).

It’s worth looking through the slides, but listening to their overview of what the Chancellor’s announcements are likely to mean for Welsh public services out to 2020, a few points stood out for me.

Firstly, the spending profile out to 2020 means that the Welsh Government’s budget for 2016-17 is likely to be generous in comparison to those we are going to see in the subsequent three years. The resource budget more or less flat-lines next year but, over the period to 2019-20, there will be a 4.5% real terms reduction in the Welsh block grant. Despite national news coverage in some quarters, this is no end to austerity and there are some difficult decisions facing whoever holds the balance of power post Assembly elections.

Notable among these is the consequence of the deal that Simon Stevens struck with George Osbourne. NHS England secured a front-loaded budget increase that is premised on an ambitious £22bn efficiency drive.

Given that the Welsh NHS are facing similar (if not more pronounced) cost pressures, the implication of the spending review settlement is that they will need to make savings of a comparable (if not greater) size if the demands on the service aren’t going to out-strip the growth in the ‘Barnett consequential’ (i.e. the increase in the Welsh Government’s block grant as a result of the increased English NHS budget).

The work that we are doing with WPS2025 and the Health Foundation will help us to understand the scale of the challenge and the likely impacts of current attempts to address it. Whatever the results of this, one thing is clear –there are going to need to be transformational changes made in the coming years.

Similarly daunting was the set of questions articulated by Victoria, who ran through the changes to benefits and “the u-turn that wasn’t”. Out of £30.6bn of public sector “Wales identifiable spending” in 2014-15, £10.7bn came through the benefits system. Although much was made of the tax credits u-turn by the Chancellor, the mooted reductions have simply been delayed – they will still come in, but only as universal credit is rolled out.

This means the headline figures for the impact on Wales are the same as they were in the summer – a loss of £600m to 2019-20, which translates into an average loss of £459 per household per year. But this average masks big differences in the impacts for different income groups, with the poorest households in society bearing the brunt (some could lose as much as £1,500 a year).

The Welsh Government’s attempts to tackle poverty in Wales will be put under increasing strain as the cumulative effect of the reductions in public spending feed through. The work that we and others (including the Bevan Foundation) are doing will help the Welsh Government to think about how to address this, but I agree with Victoria – some big questions remain.


About the author: Dan Bristow is the Deputy Director of PPIW. He has experience of working in Government and the third sector.  Prior to joining the Institute, he was a Senior Policy Advisor in the Cabinet Office and worked in the Treasury, Home Office, Sustrans and Independent Police Complaints Commission.

 

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