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Updated analysis of the Welsh Government’s budget

4 February 2021

Cathays Park Crown Building

Unallocated funding for dealing with Covid-19 for this financial year now stands at an estimated £655m, according to the latest briefing by the Wales Fiscal Analysis team at Cardiff University’s Wales Governance Centre.

In their report covering the 2020-21 budget position and next year’s Draft Budget, the researchers note that:

  • A total of £5.2bn has now been guaranteed for Wales by the UK Government in 2020-21 as a result of Covid-19 related announcements, dropping to £766 million next year.
  • Following large allocations to business support over recent months, approximately £655m remains to be committed for 2020-21, while the Draft Budget for 2021-22 leaves £689m of Covid-19 funding unallocated.
  • Next year, the available core (non-Covid) budget for day-to-day spending will grow to £17.1bn, from £16.2bn in 2020-21. This means spending will exceed pre-austerity levels for the first time – but it remains 3% lower than before austerity on a “per person” basis.
  • Core NHS spending (excluding Covid-19 spend) will increase by 4.2% in nominal terms next year, suggesting growth of 2.1% per year in real terms from 2019-20 to 2021-22. NHS spending is now 19% higher than 2010-11 levels and accounts for just under 50% of the Welsh day-to-day budget (up from 42% in 2013-14).
  • The settlement for Local Authorities includes a £176m (3.8% in nominal terms) increase from 2020-21, although this remains 8.7% lower than 2013-14 levels.
  • Despite a £200m hit to Welsh Income Tax revenues from the pandemic, given trends in the Block Grant Adjustment, the net effect of tax devolution on the Welsh budget is a loss of £25m in 2021-22.

They further point out that additional funding for Wales is likely to be triggered at the UK Budget on 3 March, noting that current available Covid-19 funding will likely not be sufficient to meet the substantial pandemic and recovery-related pressures on the NHS, local government, schools and other public services.