Health cuts soften spending blow elsewhere

Substantial cuts to the Welsh health budget over the next three years, especially on capital spending, have enabled the Welsh Government to soften the impact on other spending areas, especially education, economy and transport and heritage.

If the Welsh Government had followed priorities set in England, and ring-fenced health – as called for by the Welsh Conservatives earlier this week – the impact on the education budget in particuar would have been much more savage. As it is First Minister Carwyn Jones has been able to stick to the commitment he made to award education a 1 per cent increase over and above the overall changes to the Welsh budget.

The percentage real-terms cuts to the main departmental budgets over the next three years, shown in Table 1, reveal the headline story in the Welsh budget announced this afternoon. Capital spending takes the biggest hit across the pitch but especially in health and education. However, this has enabled Government Ministers to restrain the revenue impact of the cuts elsewhere. For example within the heritage budget the Welsh Government has limited cuts to arts funding to 4.6 per cent over the next three years compared with a 20 per cent cut in England.

Table 1: Welsh Budget Cuts 2011-12 to 2013-14

Department	% Change over 3 years (Real Terms)
	Revenue	Capital
Health & Social Services	-6.3%	-32.3%
Social Justice & Local Government	-7.1%	-38.2%
Economy & Transport	-8.1%	-35.5%
Children, Education, Lifelong Learning & Skills	-5.9%	-26.8%
Environment, Sustainability & Housing	-9.6%	-31.3%
Rural Affairs	-9.7%	-35.4%
Heritage	-9.4%	-38.2%
Public Services & Performance	-18.1%	-38.2%
Central Services & Administration	-17.7%	-38.2%
All Departments	-7.1%	-32.6%

In real terms, that is after taking inflation into account, the Welsh Government’s total budget in 2011-12 will fall by £860 million compared with the current 2010-11 financial year, and will be £1.8 billion lower by 2014-15. These reductions follow the in-year cuts of £162m to the Welsh budget which were announced by the UK Government in June. These, of course, are additional to the reductions to non-devolved budgets such as welfare (£18 billion at the UK level), which will also be felt across Wales. As the Welsh Government puts it, “Taken together, these amount to the most significant cuts to public spending in at least a generation and contrast sharply with the previous decade of growth.”

Tables 2 and and 3 summarise the overall budget while the commentary below for each department provides the summary account given in  Welsh Government’s Draft Budget which can be accessed here.

Table 2: Department Revenue Spend 2011-12 to 2013-14

Department	£000s
	2010-11 baseline at July 2010	Changes and reprioritisations made in November 2010	2011-12 New Plans Draft Budget	2012-13 Indicative Plans	2013-14 Indicative Plans
Health and Social Services	5,867,797	0	5,867,797	5,867,797	5,881,565
Social Justice & Local Government	4,406,846	-75,947	4,330,899	4,333,266	4,382,460
Economy and Transport	597,490	-7,642	589,848	584,528	587,237
Children, Education, Lifelong Learning  and Skills	1,694,551	-21,087	1,673,464	1,682,035	1,705,286
Environment, Sustainability and Housing	383,750	-8,341	375,409	369,486	371,050
Rural Affairs	126,560	-2,838	123,722	121,818	122,338
Heritage	138,962	-2,955	136,007	134,114	134,726
Public Services and Performance	48,968	-2,263	46,705	45,029	42,890
Central Services and Administration	350,588	-16,071	334,517	323,451	308,718
All Departments	13,615,512	-137,144	13,478,368	13,461,524	13,536,270

Table 3: Department Capital Spend 2011-12 to 2013-14

Department Budgets	£000s
	2010-11 baseline at July 2010	Changes and reprioritisations made in November 2010	2011-12 New Plans Draft Budget	2012-13 Indicative Plans	2013-14 Indicative Plans
Health & Social Services	303,012	-38,222	264,790	246,293	219,550
Social Justice & Local Government	53,095	-10,776	42,319	39,363	35,089
Economy & Transport	376,240	-63,046	313,194	291,315	259,683
Children, Education, Lifelong Learning & Skills	183,492	-10,139	173,353	161,243	143,734
Environment, Sustainability & Housing	417,993	-52,449	365,544	345,243	307,075
Rural Affairs	16,729	-3,895	12,834	12,402	11,556
Heritage	18,622	-3,779	14,843	13,806	12,307
Public Services & Performance	21,425	-4,348	17,077	15,884	14,159
Central Services & Administration	15,033	-3,051	11,982	11,145	9,935
All Departments	1,405,641	-189,705	1,215,936	1,136,694	1,013,088

Health and Social Services

Health and social services has been protected from any cash  reductions in its budget in 2011-12 and 2012-13 and receive a small  cash rise in 2013-14. This level of protection reflects our commitment  to ensuring the provision of frontline services across Wales.

This protection also provides a solid platform for the NHS to take forward its 5-year service plans following the 2009 reforms. We are  also protecting the social services element of the Health and Social Services budget.

Revenue funding for 2011-12 and 2012-13 remains at the same level as the budget for 2010-11. This means that all unavoidable cost increase (including pay awards inflationary pressures) will need to be self-funded by savings. In 2013-14 the budget increases by £13.8m or 0.2%.

The Capital budget to 2013-14 has decreased by £83.5m or 27.5%, with the largest reduction (-12.6%) occurring in 2011-12.

Social Justice and Local Government

Social Justice and Local Government’s overall revenue budget allocation will reduce by £24.4m by the financial year 2013-14 when compared to the 2010-11 baseline position. Although the Main Eexpensiture Group decreases by 1.7% in 2011-12, there is a 0.1% uplift in 2012-13 and a 1.1% uplift in 2013-14.

The Capital budget by 2013-14 will have decreased by £18m compared to 2010-11 which is a reduction of 34%.

The Revenue Support Grant (RSG), the main block of funding for Local Authorities, includes the necessary resources to deliver a 1% protection above the changes to the overall Welsh budget for schools. This reflects the Assembly Government’s commitment to protect funding for schools in order to ensure the delivery of the best outcomes for Welsh children.

The Assembly Government is also committed to ensuring the provision of essential social services and the funding for local authority social services has received an equivalent level of protection within the RSG.

Economy and Transport

The publication of Economic Renewal: A New Direction on the 5 July 2010 sets out the future policy framework within which the Department will prioritise its budget allocations.

Economy and Transport’s overall revenue budget allocation will reduce by £10.2m by the financial year 2013-14 when compared to the 2010-11 baseline position and the capital budget will reduce by £116.5m over the same period. Specifically in relation to 2011-12 the budget has reduced by £7.6m (1.7%) in relation to revenue and £63.1m (16.8%) in relation to capital, when compared to the 2010-11 financial year.

Despite the difficult settlement received from the UK Government this budget reflects the Welsh Assembly Government’s determination to implement Economic Renewal: a new direction and prioritise areas such as the key growth sectors and investment in Next Generation Broadband. The reduction in revenue funding for Major Events primarily reflects the successful conclusion of the Ryder Cup and in relation to the capital budget there is also a reduction in funding for property infrastructure.

In transport we remain committed to maintaining a greater proportion of the total overall expenditure on sustainable travel, although clearly the department will have to accommodate a significant reduction in its capital  budget allocation. The Department’s budget also recognises the commitment to protect concessionary fares for the 650,000 people across Wales who are benefitting from this policy.

Children, Education, Lifelong Learning and Skills

This budget reflects the positive commitment to increase funding for  schools and skills, and to protect those frontline services which impact  directly on children. The budget will enable these services to be extended  through the application of increased investment over the next three years.

By 2013-14 the Department’s revenue budget will have increased from a  baseline of £1.694bn in 2010-11 to £1.705bn. While revenue funding for  2011-12 has reduced by £21.1m (1.3%), indicative budgets for future years present positive annual increases of £8.6m, (0.5%) and £23.3m, (1.4%) for years 2012-13 and 2013-14 respectively.

In addition some budgets have been re-prioritised to ensure that funding is available to support the full roll-out of the foundation phase, to increase funding for Post 16 learners with Special Educational Needs (Post 16 SEN), to match demand for free primary school breakfasts and to reflect the increases in students within Higher Education.

Capital funding has reduced by £10.1m, 5.5% from 2010-11 budget, these reductions increase further by £12.1m, (7%) and £17.5m, (10.9%) for the next two years from 2012-13.

Environment, Sustainability and Housing

The amount available to spend in 2011-12 within the Department has decreased by £61m when compared with 2010-11 on a like for like basis. This is made of reductions of £8m and £53m in our revenue and capital budgets respectively.

This budget reflects our commitment to sustainable development and equality. Despite being in a time of reducing budgets we are protecting the Major Repairs Allowance, which funds vital repairs for tenants in council housing, and remain committed to achieving the Welsh Housing Quality Standard.  We will target support to housing services for vulnerable people and have made Supporting People a priority area.

We are protecting the most vulnerable in society through the Energy Efficiency and Fuel Poverty programme which aims to reduce fuel poverty whilst reducing carbon emissions and are maintaining 2010- 11 funding levels into next year. We are also providing a significant level of protection to our flood risk management programme and climate change considerations have been central to our budget setting process.

Rural Affairs

The Draft Budget will enable all key activity within the Rural Affairs Main Expenditure Group to proceed, including the delivery of the Rural Development Plan, the effective administration of the Single Payment Scheme, the programme to eradicate bovine TB and the Young Entrants’ Support Scheme.

The total draft budget for Rural Affairs for 2011-12 amounts to £136.6m, compared to £143.3m in 2010-11.

Revenue funding has reduced from £126.6m in 2010-11 to £123.7m in 2011-12. Capital funding has reduced from £16.7m in 2010-11 to £12.8m in 2011-12.

Heritage

Following the budget planning round revenue funding has reduced from £134.3m in 2010-11 to £130.1m in 2013-14. Capital funding has reduced from £18.6m to £12.3m over the same period.

In recognition of the important work carried out by all the organisations that the Heritage Main Expenditure Group supports the impact of this reduction in funding will be spread across the range of supported organisations including Cadw and Visit Wales.

An increase in funding is being provided to the Bilingual Wales Fund in order to support the establishment of the Welsh Language Commissioner and the implementation of the Government’s Welsh Language Strategy. We are also proposing to increase funding for Casgliad y Werin – the all-Wales virtual museum of people’s history recognising its strategic importance.

The relative priority given to arts funding recognises the important contribution which arts bodies can make to the quality of people’s lives as well as the economy.  In addition the provision of front line services and grant schemes are being prioritised over administration and support costs.

Capital expenditure has had to be focused on the most pressing strategic priorities and essential maintenance. The Welsh Assembly Government wants to work with the National Museum to support the redevelopment of the National Museum of Wales St Fagans and maintain its position as the top tourist attraction in Wales.

Public Service and Performance

The Department for Public Service Improvement aims to promote collaborative action to underpin the improvement of public services in Wales. This is in linewith the strategic requirements of One Wales and Delivering Beyond Boundaries.

The Public Services and Performance MEG also supports the Inspectorates for Care and Social Services, Healthcare, and Education and Training in Wales. Finally, the Main Expenditure Group includes provision for the Targeted Match Fund which provides central match funding, as a fund of last resort, to the 2007-13EuropeanStructural Funds Programmes.

By 2013-14, Revenue funding has reduced by £7.8 million (16%) from 2010-11.

By 2013-14, Capital funding has reduced by £7.3 million (34%) from 2010-11.

Central Services and Administration

The Central Services and Administration Main Expenditure Grouop contains a broad range of functions, including the administration costs of the Assembly Government and other central services.

Revenue funding will decrease by £16.1 million (4.8%) in 2011-12 compared to 2010-11. Capital funding in 2011-12 will decrease by £3.1 million (20.3%) compared to 2010-11.

Within the Central Services and Administration MEG revenue budget funding has been re-prioritised from Staff Costs in to General Administrative Expenditure to create a new workforce planning budget which will pay for early departures. We have removed a number of budget headings as programmes have come to an end and have allocated these resources to relieve pressures elsewhere in the budget.

As a result of the reductions to our capital budget, we plan to retain ICT assets in service longer resulting in a £0.7m reduction to this budget. The remainder of the capital budget is focused on improving accommodation and concentrating our workforce into fewer buildings which will create revenue savings in the longer term.