What the Spending Review and Draft Welsh Budget mean for public services and benefits in

Wales : joint presentation from Wales Public Services 2025 and Bevan Foundation.

Government Expenditure categories

Departmental Expenditure Limits (DEL)

- Resource DEL – day to day operating expenditure by public services, grants etc- Capital DEL – Construction, infrastructure

Annually Managed Expenditure (AME)

Resource AME - Demand-led expenditure such as pensions, benefits, debt interestCapital AME

Resource Del Real UK

Forecast

-8

-6

-4

-2

0

2

4

6

2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

Year-

on-y

ear re

al g

row

th rate

s

November 2015

July 2015

March 2015

Note: RDEL series excludes major historical switches with AME. Details are in the supplementary fiscal tables on our website.

Source: OBR

Sources Deficit Reduction 2015-16

to 2019-20

-1

0

1

2

3

4

5

PSNB

(2015-16)

Debt interest Capital

spending

(CDEL)

Other spending Receipts Welfare Public services

spending

(RDEL)

PSNB

(2019-20)

Per ce

nt o

f G

DP

Source: ONS, OBR

£6.4, 21%

£4.1, 13%

£1.8, 6%£5.5, 18%

£6.7, 22%

£6.1, 20%

Wales Identifiable Spending 2014-15 £bn

Health Education Social Services

Pensions Other Welfare Other spending

Departmental Expenditure Limit (Resource) cash £000

2015-16 Net Change % 2016-17

Health and Social Services 6,486,592 244,646 3.8% 6,731,238

Local Government 3,432,187 - 87,784 -2.6% 3,344,403

Communities and Tackling Poverty 336,614 - 3,022 -0.9% 333,592

Economy, Science and Transport 612,974 - 25,341 -4.1% 587,633

Education and Skills 1,579,609 1,201 0.1% 1,580,810

Natural Resources 294,083 - 16,323 -5.6% 277,760

Central Services and Admin 292,783 7,594 2.6% 300,377

Total WG MEG Allocations 13,034,842 120,971 0.9% 13,155,813

2015-16 2016-17 2017-18 2018-19 2019-20

Total DEL (£ million cash) 101.3 106.8 110.2 112.7 115.8

Real terms growth rate 1.6% 3.6% 1.3% 0.4% 0.7%

NHS England spending review figures

Welsh Government funding for Local Government

• WAO – fell 10% real terms 2010-15

• WLGA – aggregate external finance fell 16% real terms 2009-16

• OBR – significant drop 2014-15 to 2015-16

• Welsh Draft Budget – aggregate external finance cut 1.4% 2016-17

Real Terms changes in local authority service spending (2014-15 prices), aggregate, £ thousands

Education46%

Social26%

Other28%

2009-10

Education

Social

Other

Education48%

Social28%

Other24%

2015-16

Education

Social

Other

2009-10

Education £2,833,476

Social £1,575,413

Other £1,702,898

2015-16

Education £2,630,069

Social £1,563,977

Other £1,320,513

Council Tax Trends

Welsh Police Funding 2010-2016

0

100000

200000

300000

400000

500000

600000

700000

2010-11 2011-12 2012-13 2013-14 2014-5 2015-16

Real Budget requirement Real HO Grant Real RSG/NNDR Real Council Tax

Third Sector

• Shift to commissioning not grants for services providers

• 84% local authority income now service payments, especially social services, young people, education – protected areas

• Most relevant grant lines in draft Welsh budget cash flat

• Social housing role in Wales unchanged – implications of housing benefit changes?

Pay Bill

• 1% cap on pay rises

• National Insurance – pensions cost

• National Living Wage

• Public Sector Employment Wales 6%ish fall between 2010 - 2015

Some Key Messages

• Reports of demise of Austerity exaggerated – 4 more years

• Growing Wales-England divergence

• Continued pressure on public service innovation and change

• Continued push down to the community

• Concerns about impact on low income families and vulnerable unchanged

The Spending Review & Changes to Benefits:the u-turn that wasn’t

Victoria Winckler

The Spending Review and the Welsh Budget: Wales Public Services 2025

10th December 2015

Context

Benefits underpin social fabric of Wales:

• 651,900 get state pension.

• 619,885 children receive child benefit.

• 237,000 working-age adults get out of work benefits.

• 164,000 families in-work get benefits.

• £10.7 billion in 2014/15

CSR - what’s changed?

Cancelled:

× Tax Credits (while they still exist):

× cut in income threshold

× increase in earnings taper

Staying from Summer Budget:

Tax Credits:two child limit abolition of family element

benefit cap

main benefits frozen

ESA-WRAG cut to JSA rate

Changes to Housing Benefit

Cuts to income threshold and increase in earnings taper still apply to Universal Credit

Effect of Tax Credit ChangeShort term: Pain eased for poorest

Long term: Marginal - poorest still hit hard

Impact on Wales

Summer 2015 Budget forecast still stands:

• Macro - loss of £600m to 2019/20

• Micro - average £459 per household = 2% income

• Distribution – highly uneven impact ...

Source: James Browne (2015) The Impact of the UK Government's Tax, Welfare and Minimum Wage Reforms in Wales, IFS.

By income decile

By household type .…

Implications & questions

• Significant increase in hardship and poverty. Is there sufficient and appropriate action proposed to reduce poverty?

• Likely increased demand for public services esp. child & family. has the Welsh budget got the balance right?

• Growing social divisions – age, family type. can pensioner freebies be justified?

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21%

15%

21%

22%

15%

6%

Wales Identifiable Spending 2010-11 £m

Health Pensions Other Welfare

Other spending Education Social Services

21%

18%

22%

20%

13%

6%

Wales Identifiable Spending 2014-15 £m

Health Pensions Other Welfare

Other spending Education Social Services

Reshaping the State?

Further information can be found at:www.walespublicservices2025.org.uk

Email: Trickeym@Cardiff.ac.uk