The Welsh government has announced wide-ranging cuts across almost all departments to help prop up the country’s struggling health service and rail system.
It has also taken the unprecedented step of asking the UK Treasury for permission to switch funds from its capital to its revenue budget to ease the cash crisis, and intends to use up about half of the money it has in its reserves to cope.
The Labour-led government has had to find about £600m to balance the books for its 2023/24 budget, blaming the impact of inflation, rises in public sector pay, over a decade of austerity, Brexit and the UK government’s “mismanagement of the economy”.
An extra £425m is to be ploughed into health and social services to make up a shortfall, put down to factors including rising staffing costs and drugs price hikes.
The additional money will not be spent on new services but is needed simply to maintain the current level.
We've announced a package of financial measures to protect our public services at this difficult time, including an extra £425m for our NHS. But services still face tough choices.
— Mark Drakeford (@PrifWeinidog) October 17, 2023
This responds to pressures on our budget caused by inflation and over a decade of austerity.
The climate change budget, which includes transport, will be boosted by £83m. Extra money is needed for rail in particular because fewer passengers are using the system since the pandemic, the government says.
It means that there will be about £220m of reductions to the revenue budgets of all other departments. The education and Welsh language revenue budget, for example, will be revised down by £75m, the economy budget by £29m and rural affairs by £17m.
The government will take up to £100m out of its reserves. One of the most striking moves is the Welsh government’s decision to go to the UK Treasury to ask if it can switch up to £200m from its capital budget into its revenue pot – which it has never done before. It expects the chief secretary to the Treasury, John Glen, to allow this but has yet to hear confirmation.
Mark Drakeford, the first minister of Wales, told the Guardian: “UK departments do it all the time; the UK department of health has done it in absolute shedloads in order to balance their books. It’s all our money. We’re not asking for any more money.
“It’s just allowing us the flexibility to manage our budget. There simply is not enough money to do all the things that need to be done.”
He expressed frustration that more decisions about spending – including the allocation of funding streams that replace EU money – were being made in London rather than Cardiff. “When the money came through Europe, the decisions about how to spend it were made in Wales. Now they’re all made in Whitehall.”
The Welsh finance minister, Rebecca Evans, said: “We are not requesting any additional funding, just the freedom to deploy our existing budget in a way that enables us to deliver our priorities without the artificial straitjacket of our current unsatisfactory fiscal framework.”
She also warned: “These pressures we have sought to address this year will be even more difficult next year.”
Sources in another devolved government believe the Welsh financial crisis is symptomatic of increasing and wider attacks on their finances by some parts of the UK government, which add to spending pressures.
They believe hostile ministers in Whitehall deliberately make some spending decisions to undermine devolved governments, and are centralising spending and policies that should be controlled in Edinburgh, Cardiff or Belfast to boost Conservative political and policy agendas. “This isn’t a glitch; it’s a feature,” said a senior source.
The Welsh Conservative shadow finance minister, Peter Fox, blamed “extremely poor management” and “shortsighted decision making” underpinned by “a politically driven philosophy” for the crisis.
