Mark Drakeford, Cabinet Secretary for Finance and Local Government
The Chancellor of the Exchequer has today made an Autumn Statement about the outlook for the UK economy and the UK Government’s tax and spending plans.
This is the first UK Budget announcement following the European referendum in June and the decision to leave the European Union.
In almost 10 years of the UK Government’s austerity policies, the UK has recorded only mediocre growth in the economy and negligible growth in productivity. Meanwhile, the budget remains in deficit and government debt has increased enormously.
Going forward, the government’s policies promise to deliver only mediocre improvements in living standards and a budget which will remain in deficit until after this Parliament ends.
The Office for Budget Responsibility (OBR) has today revised its economic growth down substantially. Productivity growth has also been revised down sharply and inflation is projected to be higher. As a result, disposable income for households is now expected to grow at a much slower rate than expected in the March Budget. UK Government debt will be approximately £200bn higher in 2020-21 than previously expected.
In these uncertain times, it is even more important that we create the conditions for a strong and secure economy. Ahead of the Autumn Statement, the Welsh Government called on the UK Government to boost infrastructure investment and move away from its damaging austerity policy.
There are some steps in the right direction in today’s Autumn Statement. Overall, Wales has received an additional £442m of capital funding between 2016-17 and 2020-21. This goes some way to restore the cuts the UK Government has made to our capital budget over recent years. However, our capital budget will still be 21% lower in real terms in 2019-20 than it was in 2009-10.
We will now examine how we can make the best use of this capital funding to maximise its impact in line with our investment priorities, which are set out in Taking Wales Forward.
It is disappointing that the UK Government has not taken the opportunity to end austerity. The changes to our revenue budget – an extra £35.8m between 2016-17 and 2019-20 – are negligible and do not begin to make up for the deep cuts we have seen to public spending since the start of this decade. By the end of the decade our revenue DEL will have been reduced by 8% in real terms – equivalent to around £1bn less for vital public services in Wales.
Furthermore, there are £3.5bn of cuts in waiting for 2019-20, which could mean further cuts to the Welsh budget. This perpetuates the uncertainty we are facing at a time when providing stability and certainty is more important than ever.
In my letter to the Chief Secretary to the Treasury before the Autumn Statement, I emphasised issues of strategic importance to Wales, including the progress of the Swansea Bay City Region Deal and the North Wales Growth Deal. I am pleased both of these important deals have been recognised today. I look forward to continuing discussions with the UK Government to bring these deals to fruition as a matter of priority.
This is an Autumn Statement of missed opportunities on many fronts. The Chancellor spoke of an “economy that works for everyone”. The Welsh Government has repeatedly called for both the devolution of Air Passenger Duty and the abolition of the Severn Crossings tolls at the end of the current concession. Both of these measures would drive forward the UK economy in these uncertain times. We will continue to call for these measures to be introduced.
The UK Government has confirmed there are no plans to make further welfare savings during this Parliament, beyond those already announced – we welcome this confirmation. We also recognise that the UK Government has tried to soften the blow of the previously announced cuts by reducing the Universal Credit taper from April 2017. This is the rate at which Universal Credit is withdrawn to take account of earnings, and will mean individuals will keep more of what they earn. However, this will be more than outweighed by the losses from the previously announced cuts to the Universal Credit work allowance - the amount recipients can earn before their benefits start to be withdrawn.
There are other significant welfare cuts that have recently been implemented or are due to be implemented over the next few years, and we are also concerned about the impact of these. For example, although the cash freeze to working-age benefits has had no effect this year, the outlook for inflation means its bite is set to grow.
The Welsh Government has taken a different approach to austerity – this was set out in our draft Budget last month. Our Budget provides stability in the short term for our core services, while taking steps to deliver our ambitions set out in Taking Wales Forward. This Autumn Statement means we will continue to face hard choices in future years as we seek to protect public services amid continued uncertainty in the economy.