Public spending in Wales The End of Austerity and Beginning of - PowerPoint PPT Presentation

Public spending in Wales The End of Austerity and Beginning of Brexit: What are the implications for Wales? Wales Centre for Public Policy Event Caerdydd / Cardiff 05/02/2020 Guto Ifan DadansoddiCyllid Cymru, Canolfan Llywodraethiant Cymru, Prifysgol Caerdydd Wales Fiscal Analysis, Wales Governance Centre, Cardiff University

Contents • Day-to-day public spending on public services • Capital budget • The outlook for future Welsh budgets #WelshBudgetBriefing

Uncertainty surrounding the 2020-21 Budget • Size of the Welsh budget determined by: • UK Government spending decisions (via Barnett formula) • OBR forecasts of devolved taxes • Block Grant Adjustments, determined by forecasts of growth in equivalent UK government taxes • Spending Round 2019 spending pledges • UK Budget set for 11 March (initially scheduled for 6 November 2019) • Welsh Government Final Budget 2020-21 and final local government settlement for 2020-21 on 25 February.

Contents • Day-to-day public spending on public services • Capital budget • The outlook for future Welsh budgets #WelshBudgetBriefing

Departmental day-to-day spending by UK government 330 £ billion Spending Round 2019 325 • Recent years have seen a 320 significant loosening of the UK government’s 315 fiscal policy and fiscal 310 Spring Statement rules, allowing significant 2019 305 increases in planned 300 spending on public services. March 2017 295 plans 290 2015−16 2016−17 2017 – 18 2018 – 19 2019−20 2020−21 Ffynhonnell/Source: Institute for Fiscal Studies (2019) Keeping perspective * Wedi ei addasi i gyfri am newidiadau mewn cyfraniadau pensiwn sector cyhoeddus a newidiadau eraill. * Adjusted to strip out effect of changes to Public Service pension contributions and other classification changes.

Welsh Government day-to-day spending on public services • Two key UK government decisions: • NHS funding in England (October 2018 Budget) • Schools funding in England (September 2019 Spending Round) • Wales RDEL increasing by 1.0% in 2019-20 and 2.3% in 2020-21.

Day-to-day spending by the Welsh Government 105 • Despite recent increases to the Welsh block grant 100 next year, day-to-day 2010-11 = 100 spending on public 95 Total services will remain below 2010-11 levels in real Per-capita terms. 90 • Especially after accounting for population 85 growth. 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 Ffynhonnell/Source: Institute for Fiscal Studies (2019) Keeping perspective * Wedi ei addasi i gyfri am newidiadau mewn cyfraniadau pensiwn sector cyhoeddus a newidiadau eraill. * Adjusted to strip out effect of changes to Public Service pension contributions and other classification changes.

Accounting for demographic change 20 Health 18 • Costs for health, Education 16 Spending (£ thousand), 2020-21 education and adult Adult social care 14 social care for 12 10 individuals varies 8 significantly by age 6 4 2 0 0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 72 75 78 81 84 87 90 Age

Day-to-day spending by the Welsh Government 105 • ‘Age -adjusted per- capita’ measure accounts for 100 demographic changes in 2010-11 = 100 Wales over time, 95 Total accounting changing costs for health, Per-capita education and adult social 90 Age-adjusted per-capita services. 85 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 Ffynhonnell/Source: Institute for Fiscal Studies (2019) Keeping perspective * Wedi ei addasi i gyfri am newidiadau mewn cyfraniadau pensiwn sector cyhoeddus a newidiadau eraill. * Adjusted to strip out effect of changes to Public Service pension contributions and other classification changes.

Day-to-day spending by the Welsh Government 400 8.0% 350 7.0% • All Main Expenditure 300 6.0% Groups (MEGs) will Increase £ million (left axis) Real-terms % change 250 5.0% see an increase in Real-terms % increase (right axis) £ million 200 4.0% spending from 2019- 150 3.0% 20 plans to 2020-21. 100 2.0% 50 1.0% 0 0.0% Health and Housing and Economy and Education International Environment, Central Social Services Local Transport Relations and Energy and Services and Government the Rural Affairs Administration Welsh Language

Day-to-day spending by the Welsh Government 120 • 2020-21 Draft Budget grows 115 NHS NHS spending by 2.7% in real 110 terms, though share of budget remains similar to 105 2010-11 = 100 2019-20. 100 • No fall in non-NHS spending Total in 2020-21, but remains well 95 below 2010-11 levels in real 90 terms. Non-NHS 85 80 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

Day-to-day spending on the NHS 120 • Despite real-terms cuts over the first years of 115 austerity, NHS spending 110 approximately 16% higher Total 2010-11 = 100 than 2010-11 in real 105 terms. 100 • Slow growth in historical context e.g. almost 6% a 95 year from 1999-00 to Average 2.3% annual growth since 2012-13 90 2009-10. 85 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

Day-to-day spending on the NHS 120 • All but 7% of the increase 115 will have gone towards meeting costs associated 110 Total with a growing and ageing 2010-11 = 100 105 population. Per-capita • As a share of GDP, back to 100 Age-adjusted 2010-11 levels. per-capita 95 As share of GDP 90 85 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

Goblygiadau i Awdurdodau Lleol Implications for Local Authorities • Local Government Settlement includes an additional £184 million in Aggregate External Finance (RSG & NDR) in 2020- 21, a 2.4% real terms increase • Increases range from 3.0% for Monmouthshire to 5.4% for Newport (1.2% to 3.5% in real terms).

Implications for Local Authorities Nominal terms increase 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% • By contrast, for 2018-19 Newport The Vale of Glamorgan and 2019-20, floor funding Pembrokeshire Merthyr Tydfil was provided to limit Bridgend individual authority Gwynedd Torfaen funding decreases to 0.5% Neath Port Talbot Rhondda Cynon Taf and 0.3% respectively. Carmarthenshire Denbighshire Swansea Ceredigion Powys Cardiff Caerphilly Blaenau Gwent Isle of Anglesey Flintshire Wrexham Conwy Monmouthshire

Implications for Local Authorities • Local Government Settlement includes an additional £184 million in Aggregate External Finance (RSG & NDR) in 2020-21, a 2.4% real terms increase • Increases range from 3.0% for Monmouthshire to 5.4% for Newport (1.2% to 3.5% in real terms). • Including specific grants, total support for local authorities will increase by 1.8% in real terms

Implications for Local Authorities Total Welsh Government support provided through Aggregate External • The value of Welsh Finance (RSG + NDR) & Specific Grants government funding to 6,400 Welsh local authorities fell by 6,200 almost a £1 billion from Total Welsh 2010-11 to 2018-19, but will 6,000 Government support recover slightly over 2019-20 5,800 and 2020-21. £ million 5,600 • Total support will remain 5,400 13.5% lower than 2010-11 5,200 levels in real terms… • … or 16.2% on a per-capita 5,000 terms. 4,800 4,600 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

Implications for Local Authorities Total Welsh Government support provided through Aggregate External • The value of Welsh Finance (RSG + NDR) & Specific Grants 105 government funding to Welsh local authorities fell by 100 almost a £1 billion from Total Welsh 2010-11 to 2018-19, but will Government support 95 recover slightly over 2019-20 2010-11 = 100 and 2020-21. 90 • Total support will remain 13.5% lower than 2010-11 85 levels in real terms… Per-capita • … or 16.2% on a per-capita 80 terms. 75 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

Implications for Local Authorities Real terms percentage change in net current service expenditure, by • Local authorities have local authority spending area between 2009-10 and 2018-19 prioritised social services and – to a lesser extent – Social Services education. Council fund housing and housing benefit • Demand and cost pressures Education associated with children and Environmental, waste and regulatory servies families’ social services have been one of the main drivers Tax collection and core administration behind increased social Transport services spending. Libraries, culture, sport and recreation Planning, development, coroners' and other courts services -60.0% -40.0% -20.0% 0.0% 20.0%

Cynnwys / Contents • Day-to-day public spending on public services • Capital budget • The outlook for future Welsh budgets #WelshBudgetBriefing

Budget for capital spending • The Welsh Government’s capital budget will increase by 2.4% this year (£18 million additional from Spending Round 2019) • On top of existing plans for 2020-21, the Welsh Government allocated an additional £545 million for capital spending in the Draft Budget • £145 million for decarbonisation and biodiversity projects