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“A Perfect Storm”: new analysis portrays difficult Welsh Draft Budget

15 December 2022

Spending outside of the NHS and local government will fall in real terms next year amidst a challenging outlook for Welsh public expenditure, according to an initial analysis of the 2023-24 Draft Budget by the Wales Fiscal Analysis team.

Cardiff University’s Wales Governance Centre published the analysis as an article the day after the Welsh Government Finance Minister, Rebecca Evans, outlined her spending plans.

The WFA team had previously explained that record inflation would wipe out hundreds of millions of pounds from the real-terms value of the Welsh budget.

But so-called Barnett consequentials generated by spending announcements in England have ensured a less challenging settlement for the NHS and particularly local government; although spending will likely fall short of the funding pressures felt by the health service in the aftermath of the pandemic. Spending on core NHS services is set to increase by £415 million next year and by £615 million by 2024-25.

Meanwhile, local government was a “relative winner” in the Draft Budget - an additional £227m has been added to the settlement next year (more than doubling the planned increase in funding), and an additional £268m has been added in 2024-25. However, it is noted that given local government cost and demand pressures are so high, council tax increases could potentially be expected next April.

The analysis also notes that the future outlook for public sector pay deals remains unclear and is likely to be a source of strain on spending plans, and on the real terms pay of public sector workers, over the coming years.

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