Extra £570m NHS funding in Welsh draft budget

It looks a hard road ahead for local councils in 2014/2015

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The NHS in Wales will get £570m of extra funding over three years, Finance Minister Jane Hutt has announced.

It includes £150m for this financial year she told AMs as she unveiled the Welsh government's draft budget.

She said the extra money would help the NHS in Wales to avoid a scandal such as the one in Stafford Hospital, where hundreds of patients died as a result of neglect and abuse.

However funding for local government will see a cut of 5.81% next year.

Early calculations suggest that local government cuts are particularly tough.

Local government spending will fall from £4.648bn this year to £4.466bn next year, a cut in cash terms of 3.91% or 5.81% in real terms.

Their budgets will be around 9% lower in real terms between now and 2015-16.

Meanwhile, Ms Hutt said the pressures faced by the NHS "will continue to grow".

Welsh NHS spending will rise from £5.722bn to £5.927bn next year, an increase of 3.58% in cash terms or 1.68% in real terms.

Budget deal

Earlier in the day, Plaid Cymru leader Leanne Wood and Liberal Democrat leader Kirsty Williams agreed to help the minority Labour administration get its budget through the assembly chamber.

Analysis

Today's draft budget is the nightmare before Halloween for local councils in Wales.

Relatively protected compared to their English counterparts thus far, they'll take a substantial hit over the next two years - around 9% of their budgets will disappear in real terms.

The warnings have been coming in recent months but the black and white figures will still come as a shock to many councillors.

They've been instructed to Welsh government to protect spending on schools and social care, which leaves them with only a limited portion of their budget where they can find the savings.

They'll be things like libraries, museums, street lighting, and so on.

Why has the hit been so severe?

Because the Welsh government has decided that, after a summer spent reviewing the needs of the NHS in Wales, it needs a cash injection.

Several years of cash flat budgets have resulted in missed targets and difficult headlines for the health service.

Enough is enough, ministers have decided. It's getting an immediate transfusion of £150m in this financial year, followed by £180m more next year and £240m next year. Officials say the £570m package is a direct result of that summer budget review.

Those figures, however impressive on the surface, are cumulative, which means that actually, as a result, NHS spending will still not keep pace with inflation next year or the year after.

But the extra money will be welcomed with open arms by beleaguered finance directors at local health boards up and down the country.

Elsewhere, the education budget, which excludes schools, has taken a hit too - a real terms cut of around ten per cent on their day to day spending over the next two years.

The Natural Resources and Food department fares even worse, with a cut of around 15% after inflation over the next two years.

But the headlines from this budget are all about one landmark decision - probably the biggest financial policy shift of this assembly - to turn on the health spending taps once again.

Town halls up and down the land will be dealing with the consequences for years to come.

But Conservative shadow finance minister Paul Davies criticised the budget deal.

"Clearly they are willing to prop up this failing Labour government," he said.

Under the terms of the deal, ministers will devote £100m to Plaid and Lib Dem spending priorities in return for the two opposition parties abstaining in the crucial vote in December.

The money included £50m to treat more patients in the community rather than hospital and the doubling of funding for the pupil deprivation grant, a scheme to help poorer school pupils.

Whilst praising the extra spending Welsh ministers had agreed to as part of the budget negotiations, Ms Wood raised concerns about the impact of local government cuts.

"What effect will this have on their ability to provide essential services?" she asked the finance minister.

"What will this mean for council tax increases next year?

"What advice do you intend to issue to local government about council tax, and what impact will this budget have on young people trying to stay in education and gain qualifications?"

Ms Hutt said it was not possible to "shield" all services from UK government spending cuts.

"Rising demand levels, cost increases and pressures resulting directly from the UK government's welfare reforms are biting," she said.

She stressed the priority was to protect health, schools and universal benefits, such as free prescriptions, school breakfasts and bus passes for older people.

"We have also been clear that our focus will continue to rest on creating growth and jobs for the Welsh economy.

"Our commitment to tackle poverty by raising educational attainment and supporting children, families and deprived communities, will also help to achieve a fairer, healthier Wales," Ms Hutt added.

Lib Dem finance spokesman Peter Black AM urged Ms Hutt to ensure the money got to those "in most need" and was spent as effectively as possible.

Commenting on another key element of the budget deal his party and Plaid Cymru had made with Welsh ministers, he said: "I'm very proud indeed that we now have £71.3m supporting the poorest pupils in our communities next year, a commitment to investment in education and training."

Budget investment headlines:

According to the Welsh government, these are the main areas of investment:

  • Health budget increased with a three year package of £570m for the NHS, additional £150m in this financial year
  • New £50m Intermediate Care Fund to help integrate health, social services and housing, so people can stay in their own homes and relieve pressures on other services.
  • Increased spending on schools over the next two years
  • Pupil Deprivation Grant extended to 2015-16 and will provide £35m of extra investment in 2014-15. Support rises from £450 per pupil to £918
  • Extra £11m to double the number of children benefiting from free childcare and parenting support through Flying Start by 2016
  • Funding for universal benefits - free prescriptions, free school breakfasts and milk, free swimming and concessionary fares -increased
  • £33.6m invested over the next two years to put and keep 500 community support officers on the beat
  • Extra £617.5m for large projects across Wales, such as investment in housing, transport, schools and health. Includes £65.5m for immediate investment in projects such as the final phase of the Children's Hospital for Wales in Cardiff
  • Three year Jobs Growth Wales programme which tackles youth unemployment extended to a fourth year. Extra £12.5m invested in 2015-16, taking the total number of job opportunities created from 12,000 to 16,000
  • Some £20m will be given to support apprenticeships in Wales into 2015-16.

Health

BBC Wales health correspondent Owain Clarke writes:

The Welsh government hopes the extra funding for the NHS will be a shot in the arm for a service which has often this year looked as if it is struggling to cope.

The health and finance ministers spent the summer looking at the problems the NHS faced and came up with a figure. The result - £570m - exactly the three-year package of extra investment announced today.

BBC Wales Health Correspondent Owain Clarke looks into how the extra NHS money could be spent

But bear in mind some economists estimate that the NHS here needs more - well in excess of £200m extra a year just to stand still.

Why? Most of the money is spent on staff - and most of them on contracts which give them incremental rises each year. So unless jobs are cut, or there's a pay freeze then the bill increases.

Also spending on drugs and medicines increases year on year, as does the costs of replacing equipment.

Don't forget either we're living longer, putting more strain on the service and the NHS is also a notoriously inefficient organisation.

So a big chunk of the extra money could be swallowed up almost immediately. The Welsh government's budget deal also includes a £50m fund designed to keep people out of hospital who don't need to be there.

A huge rise in the number of elderly people going to A&E put the NHS under a massive strain in the spring. There's also almost £10m for robotic cancer surgery.

Up until now dozens of Welsh men have had to go to England for less invasive prostate cancer operations and pay up to £15,000 for the privilege.

But one of the key questions will be what will the seven Welsh health boards do with the rest money coming their way? Will they invest in sorting out some of the longer term challenges they face or take their foot off the pedal?

The British Medical Association (BMA) Wales welcomed investments into a new intermediate care fund and enhancements to health technology funding, which it said was "long overdue".

Secretary Dr Richard Lewis said: "Doctors and healthcare staff need to know that our limited resources are being targeted at services that matter to patients and support their day to day work.

"The government need to be honest with the profession and the public about what can and cannot be delivered in these financially straightened times.

"There has to be a focus on clinical priorities and safe services. There is no room for unnecessary bureaucracy and empty targets."

The Welsh NHS Confederation, which represents health boards, welcomed the investment but said: "Even with this additional funding, change must take place right across Wales to ensure efficient, safe and sustainable health care services are provided within the resources allocated by Welsh government.

"This will inevitably mean that difficult choices have to be made on what services are provided where and when."

The Unison union said it applauded the Welsh government for its "commitment to a publicly owned and financed" NHS as well as the increase in funding.

Wales secretary Margaret Thomas said: "Under the circumstances, this is a responsible budget proposal from the Welsh government."

Local government

Councillor Aaron Shotton, the Welsh Local Government Association's finance spokesperson said by the end of 2015-16, local government will have "borne the brunt of austerity" in Wales.

"This will see councils potentially having to close libraries and sports centres, slash pothole and other day-to-day maintenance budgets, cut bus subsidies and switch off streetlights between midnight and dawn," he said.

"While local councils will do everything they can to protect frontline services like education and social care, they will simply not be able to protect everything

Jane Hutt said Wales' finances had faced a £1.7bn cut by the UK government since 2010

Commenting on the budget, the TUC in Wales said this was a "hugely challenging time for all who believe in social justice and quality public services".

General secretary Martin Mansfield said the Welsh government had worked to mitigate the impact of UK cuts since 2010,

He said: "The UK government has slashed our finances by £1.7bn a year in order to pursue their austerity ideology - on top of Wales already being under funded due to the Barnett formula.

"The Welsh government approach is prioritising the best use of the resources left available to them.

"It will be a very difficult process but we will try to support them in that effort.

"All public service employers must play their full part in holding together our Welsh public service ethos."

He said there must be "no knee jerk moves" towards pay cuts, job cuts and privatisation".

Economy and jobs

BBC Wales economics correspondent Sarah Dickens writes:

With the economy of Wales held back by too many people in low paid or low skilled work and many others not well enough to work, this budget appears to be trying to tackle that to make Wales wealthier.

While extra money for health will flow back into the wider economy in the short term, it is hoped that increasing the impact of Flying Start's parenting support and the extra money for teaching children who are eligible for school meals will together try to break the poverty cycle.

In an attempt to get more young people working the Jobs Growth Wales programme is being extended and an extra £12.5m is being spent to create another 4,000 job opportunities for 16-24 year olds. At the same time £20m will support apprenticeships.

The losers as expected are local authorities. The local government budget is being cut by 3.9% in cash terms. That's equivalent to cuts of 5.8% when inflation is taken into account.

It also needs to be remembered that two thirds of local government spending is covered by education and social services, leaving just one third to absorb those cuts.

That includes leisure services, libraries, road repairs and street lighting but also planning and economic regeneration that can have a direct impact on jobs and prosperity locally.

We shall hear how that directly affects local councils next week.

The Federation of Small Businesses's Welsh policy unit chair Janet Jones said:

"On the face of it the budget announced today appears to be well grounded, with the Welsh Government embracing the use of innovative forms of finance to invest in much-needed infrastructure projects."

Education

BBC Wales education correspondent Arwyn Jones writes:

The Pupil Deprivation Grant (PDG) was introduced last year.

Schools are allocated funds of £450 per child on free school meals, aged five to 15, which goes directly into their budgets.

Following today's deal, that should more than double to £918 in 2014/15.

The Welsh government has always stressed that each school will be able to decide how it spends its allocation of money.

But it does expect the money to help challenge the link between poverty and achievement in schools, with a particular focus on literacy and numeracy.

However earlier this year there were reports that schools were absorbing the money into their budgets, using the money to buy tablet computers and to pay for teaching assistants.

So now schools have to account for their spending by publishing an online breakdown, as part of a push for greater transparency.

Last month a survey of schools by the Liberal Democrats suggested that only 23% of schools use the PDG funding strictly for pupils on free school meals.

But that's the only real evaluation to date of the PDG.

To be fair, it is still early days, and the Welsh government has commissioned a team from Cardiff University to monitor how effective the grant has been. They're due to start reporting their findings next year.

So, yes, the money may have doubled. But we'll have to wait to see if it's money well spent.

Following the announcement of the draft budget, the National Union of Teachers (NUT) said while education had not been shielded from the implication of cuts to Welsh government finances, they were pleased with the "significant investment" for the PDG.

NUT secretary David Evans said: "We are still lagging behind other parts of the UK. However, I think it is fair to accept that in the face of swingeing cuts to the Welsh government's funding to have £35m earmarked for schools through the PDG is something to be positive about."

The Welsh budget since 1999 - source: Welsh government The Welsh budget since 1999 - source: Welsh government

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