Welsh budget facing further £1.5bn of cuts, warns IFS

The reports predict that £1.5bn worth of cuts could be on the way

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Nearly £1.5bn of cuts could be made to the Welsh government's budget over the next four years, a leading think tank has warned.

The Institute for Fiscal Studies (IFS) said this would be on top of a near 10% budget cut since 2010.

It also revealed the Welsh NHS had faced far deeper cuts than its counterparts in England or Scotland.

The Welsh government said the report showed the challenges faced since UK government budget cuts in 2010.

The report was launched at a conference in Cardiff on Thursday on how public services meet the financial challenges.

The IFS said Welsh ministers faced at least another four years of cuts, alongside growing pressure on health and social care, which could see dramatic cuts in other areas of expenditure, such as transport, culture and housing.

Start Quote

A focus of the Welsh government should be on ways of reducing the demand and cost pressures facing these public services over the coming years”

End Quote David Phillips Senior IFS research economist

These spending reductions are likely to be between £800m and £1.4bn, depending on economic growth and UK government financial decisions.

The Welsh government's budget currently stands at around £15bn.

The IFS has also analysed the Welsh government's budget decisions since 2010.

It said the health budget had been cut by 8.6% in real terms, with the economy department cut by 20.8% and education and skills by 10.1%.

But local government had seen a much smaller cut of around 4.5%.

In contrast, the Scottish health budget had risen by 0.4% in real terms over the same period and the English health budget had increased by 3.1%.

'Social justice'

Welsh Conservatives have consistently attacked what they have called "record breaking cuts" to the Welsh NHS.

But the Welsh government says it has pursued "distinctive Welsh budgets that reflect our priorities, based on principles of fairness and social justice".

The Welsh draft budget for 2014-15 is due to be unveiled on 8 October, following a review of spending on the NHS over the summer.

Senior IFS research economist and report author David Phillips said: "The planned UK-wide austerity implies four more years of cuts to the Welsh government's budget, on top of the cuts already implemented since 2010-11.

Analysis

The current coalition government in Westminster intends to pursue austerity politics until after the next general election.

Even if Labour was to win power in 2015, Ed Miliband has said that the party would not overturn the cuts.

So - austerity stays, and consequently you would expect Wales to face its share of the cuts.

At the same time as these financial pressures, the Welsh government and other public sector organisations are having to provide for a growing and ageing population.

The report says that even if austerity was to stop in 2017, then these increased pressures would require significant extra spending to 2025 on budgets such as health, social care and education in order to meet the demand.

This would still lead to difficult trade-offs being necessary, so the IFS is concerned that spending on other services in the 12 years to come could remain substantially below current levels.

"Overall this means that spending by the Welsh government in 2017-18 is set to be between 14% and 17% lower than it was in 2010-11, and at a similar level to that seen around 2004-05."

"Even an increase in the total Welsh government budget of just over one-fifth over the period 2017-18 to 2025-26 would still lead to difficult trade-offs being necessary.

"A growing and ageing population and rising demand for health, social care and schools spending could mean spending on other services in 12 years' time remaining substantially below current levels and, indeed, perhaps facing continuing cuts even after the fiscal repair job is complete.

"A focus of the Welsh government should be on ways of reducing the demand and cost pressures facing these public services over the coming years."

Responding to the report, a spokesperson for the Welsh government said: "The IFS report clearly shows the significant financial challenges we have faced since the UK government introduced unprecedented cuts to our budget in 2010.

"Successive UK budgets have brought further cuts and, as indicated by the IFS report, all evidence is that there is more to come."

The Welsh government said it had set out a clear vision of how, against a challenging financial settlement, it aimed to improve public services.

A second report, for the same conference, warned funding pressures and rising demand could mean Welsh public services facing a funding gap of between £2.5bn and £4.6bn by 2025.

Independent think tank Wales Public Services 2025 predicted demographic change and increasing costs could drive health spending up from the current 42% today to 57% of the Welsh government's budget by 2024-25.

Report author Mark Jeffs said if core services such as health and schools were protected, funds for other services including bin collection, housing, leisure centres, street lighting and roads would be reduced sharply.

He said it was time to fundamentally change "the way we think about, plan and deliver services".

The conference was addressed by Sir Paul Williams, who is leading a commission on public service reform across health, education and local government which is due to report in the coming months.

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