Written Statement - New End-Year Flexibility Arrangements for Devolved Administrations

In Budget 2011, the UK Government announced a new Budget Exchange scheme to replace the previous End Year Flexibility (EYF) scheme for managing public spending across years.  The Welsh Government has made it clear that there are a number of features of the new Budget Exchange system that are not suitable for Devolved Administrations and has been pressing the UK Government to change arrangements.

I am pleased to announce that, following discussions last week between the Chief Secretary to the Treasury (CST) and I, and between the Finance Ministers of the three Devolved Administrations and the CST, the UK Government has now agreed that a modified version of the Budget Exchange system will apply to Devolved Administrations’ underspends during the Spending Review period. The Devolved Administrations will be able to carry forward underspends, up to an agreed cap. Unlike Whitehall departments, there will be no requirement to inform the Treasury in advance of the following year of the expected under spend in order to carry over the funding.

However, if a Devolved Administration wishes to inform the Treasury about planned under spends in advance of the year end then they will be able to access the rolled-over funding earlier in the following financial year.

The agreed cap is 0.6% of our Resource DEL (RDEL) budget and 1.5% of our Capital DEL (CDEL) budget.  For 2011-12, the cap will be £83m RDEL and £19m CDEL.  While underspends which are in excess of this limit will not be carried forward, a cap at this level is sufficient to ensure that, with careful financial management, resource voted to Wales by Parliament will not be lost.  The cap is significantly in excess of our underspends in recent years.  For example, this year our RDEL underspend was 0.14% and our CDEL underspend was 0.20%.

I am pleased that the Treasury has responded positively to a coordinated approach by the Devolved Administrations on this issue and the CST has recognised our unique status in the new arrangements.  These new arrangements will offer the Welsh Government some much needed flexibility to help us respond to the challenge of managing with reducing budgets.   I have expressed, however, my disappointment that the Treasury is still holding onto more than £400m in EYF stocks voted by Parliament to Wales which, if released, could be used to support public services and boost the economy in Wales. 

This statement is being issued during recess in order to keep members informed. Should members wish me to make a further statement or to answer questions on this when the Assembly returns I would be happy to do so.