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Rebecca Evans MS, Minister for Finance and Local Government

First published:
14 September 2021
Last updated:

The Chancellor of the Exchequer has announced a UK government Spending Review which will conclude on 27 October alongside an Autumn Budget.  The review will set the amount of funding available to the Welsh Government for the next three years to 2024-25.  

This Statement provides an update to Members on the immediate implications for Wales, and the priority areas the Welsh Government believe the UK Government should address in the Spending Review. 

As part of its announcement, the UK Government provided detail of the overall size of the envelope for the Spending Review.  On the resource side, this is bigger than the amounts included in the March Budget, funded by the increase to National Insurance rates. The capital amounts are unchanged since the March Budget.

Initial analysis suggests that the National Insurance increase and the associated increase in spending on health and social care in England could mean additional funding for the Welsh Government of around £600m a year.  However, we will only know how that fits into the overall UK Government spending plans and the actual impact on our budget when the Spending Review outcome is published at the end of October.  We will also need to understand the implications for public sector employers who pay National Insurance.

Funding allocations in Wales will be determined as part of the Welsh Government’s budget process.  This will be set against a challenging economic backdrop as we continue to navigate the implications of EU exit and manage the ongoing impacts of Covid-19.  Our investment led recovery will support the many people in Wales affected by the pandemic as we reconstruct our public services and transform our economy into one which is greener and fairer.  The UK Government must provide additional budgetary flexibility to assist our efforts to deliver our ambitious infrastructure plans and support transitional programmes.

The Spending Review provides the UK Government with the opportunity to make a significant investment to support our collective efforts to deliver net zero carbon and tackle the climate and nature emergency.  As part of this, the UK Government must urgently work with us to develop a formal strategy and funding programme for long-term remediation, reclamation and repurposing of coal tip sites to manage climate impacts and address public safety concerns.  If we can agree a way forward, there is an opportunity for us to demonstrate our collective commitment as we look ahead to the UK hosting COP26.

The UK Government must also invest in Wales by replacing EU funding in full, and support Welsh farmers and rural communities who are central to nature recovery efforts. This will require the UK Government to reverse the approach it has adopted to deduct Wales’ existing EU funding which has already been committed to priority projects – and which has resulted in £137m less funding for rural communities in Wales this financial year alone.

We require an unequivocal commitment from the UK Government that it will only use the UK Internal Market Act financial assistance powers to create new UK-wide programmes in devolved areas of responsibility with the explicit consent of the devolved governments.  The UK Government must also turn into tangible actions its expressed desire to work within the policy direction set by devolved governments.  To do otherwise risks duplicating efforts, impeding value for money and blurring accountability resulting in an incoherent and fractured delivery landscape for critical programmes and services individuals and businesses rely on.

As a first step, the UK Government must review its decision to withhold the £375m of annual EU Structural Funding the Welsh Government has invested to deliver national programmes including employability and apprenticeships, business support and local economic development. This funding is essential to our reconstruction effort in Wales, and should be restored.  To address regional inequity, the UK Government should focus its effort on spending on reserved matters including addressing historical underspending on rail infrastructure and research and development in Wales.  The UK Government must also commit to fully fund the ongoing operations needed at the Welsh border following EU exit.

The UK Government must do more to deliver progressive policies to address inequalities and to prevent hard working families from plummeting into poverty.  This will require a comprehensive package of active labour market measures, more ambitious investment in training and skills, tax measures to support the most vulnerable in our society and improved financial support available to low-income households.  The £20 boost in Universal Credit has been a lifeline for many households and ending it will impose real and unnecessary hardship.

There remains much uncertainty about Covid.  Whilst there is some cause for cautious optimism due to the pace of the vaccine rollout we will need to continue taking measured steps and stay vigilant to the ongoing threat this pandemic poses.  The UK Government must take a flexible approach to ensure UK-wide Covid support schemes, including the Coronavirus Job Retention Scheme are able to continue to help shield our economies and protect our communities.