Jane Hutt, Minister for Finance and Leader of the House
The Chancellor of the Exchequer has today made an Autumn Statement on the outlook for the UK economy and the UK Government’s tax and spending plans. This Written Statement sets out the main implications for Wales.
Overall the Chancellor’s Statement means further austerity for Wales and the other Nations of the United Kingdom. There is good news for Wales in the increased capital allocation that we will receive, but this is partly funded by revenue cuts and it does not compensate for previous cuts to our capital budgets.
There was much in the Chancellor’s Statement and the report of the Office for Budget Responsibility about the UK’s economic prospects. GDP is expected to contract by 0.1% this year and then expand gradually over the next 5 years. The Chancellor is responding to this weaker than expected economic outlook by accepting that he has not met his debt targets.
The Welsh Government's Budget beyond the current Spending Review period will depend on the outcome of next year's Spending Review. However, on the basis of the Chancellor’s Statement, the outlook is for further austerity. To eliminate the deficit the Chancellor has said that there will be real cuts in UK spending on public services extending into 2017/18.
In the short term, there are some welcome additions to the Welsh Government's Budget for Jobs and Growth over the remaining two years of the current Spending Review period. We have been calling on the UK Government to change course and take swift and decisive action to increase capital investment in projects that will create jobs quickly and make a lasting difference to our economy. Most recently, I urged the Chief Secretary to take action at the Finance Ministers’ meeting last month. And the joint Statement yesterday by the Welsh, Scottish and Northern Irish Government’s First Ministers reiterated the case for more capital investment. The additional capital the UK Government has announced today – an extra £90m in 2013-14 and £130m in 2014-15 – is welcome. Whist this does not fill the gap made by previous spending cuts, this represents a major shift by the UK Government towards the position we have long been advocating.
In this context the Welsh Government is doing all it can to boost infrastructure investment in Wales. That is why we announced yesterday, initiatives on schools and roads, which will deliver £500m of additional investment over the next two to three years – the capital allocations announced by the Chancellor today are smaller than those announced in the Welsh Government’s Budget.
We are concerned by the revenue reductions, including further cuts to welfare benefits, that are being made by the Chancellor.
The implication of the Autumn Statement for Wales initially looks like, in 2013-14, a revenue increase of £16.651m. However, the revenue totals include a Barnett consequential for an extension to the Small Business Rate Relief Scheme. The Welsh Government has previously called for an extension to this scheme. If we choose, as we have done previously, to participate in the UK level scheme we will forego the consequential. If this adjustment is taken into account the overall picture in 2013-14 is a revenue decrease of £6.389m.
It is welcome that in the Autumn Statement the UK Government has also made clear its commitment to continuing engage with the Welsh Government to explore options for improving the M4 in South Wales. Funding options are being considered alongside discussions on the recommendations of the Silk Commission and recent announcements on Welsh funding. The UK Government plans to issue an initial response to the Silk Commission in Spring 2013.
The Chancellor said the UK Government had accepted recommendations from pay review bodies not to press ahead with regional pay. We welcome this and also the announcement that Enhanced Capital Allowances will also be made available at designated sites in the Ebbw Vale and Haven Waterway Enterprise Zones. This will support business investment and growth. The inclusion of Newport in the next group of cities to benefit from ultra fast fixed broadband, significant science investment at Swansea University and, more generally, the injection of capital in the new Business Bank is all positive news for the Welsh Economy.