Public spending in Wales The End of Austerity and Beginning of - - PowerPoint PPT Presentation

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Public spending in Wales The End of Austerity and Beginning of - - PowerPoint PPT Presentation

May 29, 2023 38 likes •402 views

Public spending in Wales The End of Austerity and Beginning of Brexit: What are the implications for Wales? Wales Centre for Public Policy Event Caerdydd / Cardiff 05/02/2020 Guto Ifan DadansoddiCyllid Cymru, Canolfan Llywodraethiant Cymru,

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Public spending in Wales

The End of Austerity and Beginning of Brexit: What are the implications for Wales? Wales Centre for Public Policy Event

Caerdydd / Cardiff 05/02/2020 Guto Ifan

DadansoddiCyllid Cymru, Canolfan Llywodraethiant Cymru, Prifysgol Caerdydd Wales Fiscal Analysis, Wales Governance Centre, Cardiff University

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Contents

  • Day-to-day public spending on public

services

  • Capital budget
  • The outlook for future Welsh budgets

#WelshBudgetBriefing

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Uncertainty surrounding the 2020-21 Budget

  • Size of the Welsh budget determined by:
  • UK Government spending decisions (via Barnett formula)
  • OBR forecasts of devolved taxes
  • Block Grant Adjustments, determined by forecasts of growth in equivalent UK government

taxes

  • Spending Round 2019 spending pledges
  • UK Budget set for 11 March (initially scheduled for 6 November

2019)

  • Welsh Government Final Budget 2020-21 and final local

government settlement for 2020-21 on 25 February.

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Contents

  • Day-to-day public spending on public

services

  • Capital budget
  • The outlook for future Welsh budgets

#WelshBudgetBriefing

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Ffynhonnell/Source: Institute for Fiscal Studies (2019) Keeping perspective * Wedi ei addasi i gyfri am newidiadau mewn cyfraniadau pensiwn sector cyhoeddus a newidiadau eraill. * Adjusted to strip out effect of changes to Public Service pension contributions and other classification changes.

Spring Statement 2019 March 2017 plans Spending Round 2019

290 295 300 305 310 315 320 325 330 2015−16 2016−17 2017–18 2018–19 2019−20 2020−21 £ billion

  • Recent years have seen a

significant loosening of the UK government’s fiscal policy and fiscal rules, allowing significant increases in planned spending on public services.

Departmental day-to-day spending by UK government

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Welsh Government day-to-day spending on public services

  • Two key UK government decisions:
  • NHS funding in England (October 2018 Budget)
  • Schools funding in England (September 2019 Spending Round)
  • Wales RDEL increasing by 1.0% in 2019-20 and 2.3% in

2020-21.

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  • Despite recent increases

to the Welsh block grant next year, day-to-day spending on public services will remain below 2010-11 levels in real terms.

  • Especially after

accounting for population growth.

Ffynhonnell/Source: Institute for Fiscal Studies (2019) Keeping perspective * Wedi ei addasi i gyfri am newidiadau mewn cyfraniadau pensiwn sector cyhoeddus a newidiadau eraill. * Adjusted to strip out effect of changes to Public Service pension contributions and other classification changes.

Total Per-capita 85 90 95 100 105 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2010-11 = 100

Day-to-day spending by the Welsh Government

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  • Costs for health,

education and adult social care for individuals varies significantly by age

Accounting for demographic change

2 4 6 8 10 12 14 16 18 20 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 72 75 78 81 84 87 90

Spending (£ thousand), 2020-21 Age

Health Education Adult social care

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Ffynhonnell/Source: Institute for Fiscal Studies (2019) Keeping perspective * Wedi ei addasi i gyfri am newidiadau mewn cyfraniadau pensiwn sector cyhoeddus a newidiadau eraill. * Adjusted to strip out effect of changes to Public Service pension contributions and other classification changes.

Total Per-capita Age-adjusted per-capita 85 90 95 100 105 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2010-11 = 100

Day-to-day spending by the Welsh Government

  • ‘Age-adjusted per-capita’

measure accounts for demographic changes in Wales over time, accounting changing costs for health, education and adult social services.

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  • All Main Expenditure

Groups (MEGs) will see an increase in spending from 2019- 20 plans to 2020-21.

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 50 100 150 200 250 300 350 400

Health and Social Services Housing and Local Government Economy and Transport Education International Relations and the Welsh Language Environment, Energy and Rural Affairs Central Services and Administration

Real-terms % change £ million Increase £ million (left axis) Real-terms % increase (right axis)

Day-to-day spending by the Welsh Government

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  • 2020-21 Draft Budget grows

NHS spending by 2.7% in real terms, though share of budget remains similar to 2019-20.

  • No fall in non-NHS spending

in 2020-21, but remains well below 2010-11 levels in real terms.

Total NHS Non-NHS

80 85 90 95 100 105 110 115 120 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

2010-11 = 100

Day-to-day spending by the Welsh Government

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Day-to-day spending on the NHS

  • Despite real-terms cuts
  • ver the first years of

austerity, NHS spending approximately 16% higher than 2010-11 in real terms.

  • Slow growth in historical

context e.g. almost 6% a year from 1999-00 to 2009-10.

Total

85 90 95 100 105 110 115 120 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

2010-11 = 100 Average 2.3% annual growth since 2012-13

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Total Per-capita Age-adjusted per-capita As share of GDP

85 90 95 100 105 110 115 120 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

2010-11 = 100

  • All but 7% of the increase

will have gone towards meeting costs associated with a growing and ageing population.

  • As a share of GDP, back to

2010-11 levels.

Day-to-day spending on the NHS

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Goblygiadau i Awdurdodau Lleol Implications for Local Authorities

  • Local Government Settlement includes an additional £184

million in Aggregate External Finance (RSG & NDR) in 2020- 21, a 2.4% real terms increase

  • Increases range from 3.0% for Monmouthshire to 5.4% for

Newport (1.2% to 3.5% in real terms).

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Implications for Local Authorities

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% Newport The Vale of Glamorgan Pembrokeshire Merthyr Tydfil Bridgend Gwynedd Torfaen Neath Port Talbot Rhondda Cynon Taf Carmarthenshire Denbighshire Swansea Ceredigion Powys Cardiff Caerphilly Blaenau Gwent Isle of Anglesey Flintshire Wrexham Conwy Monmouthshire

Nominal terms increase

  • By contrast, for 2018-19

and 2019-20, floor funding was provided to limit individual authority funding decreases to 0.5% and 0.3% respectively.

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  • Local Government Settlement includes an additional £184 million in

Aggregate External Finance (RSG & NDR) in 2020-21, a 2.4% real terms increase

  • Increases range from 3.0% for Monmouthshire to 5.4% for Newport (1.2% to

3.5% in real terms).

  • Including specific grants, total support for local authorities will increase by

1.8% in real terms

Implications for Local Authorities

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Total Welsh Government support provided through Aggregate External Finance (RSG + NDR) & Specific Grants

Total Welsh Government support

4,600 4,800 5,000 5,200 5,400 5,600 5,800 6,000 6,200 6,400 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

£ million

Implications for Local Authorities

  • The value of Welsh

government funding to Welsh local authorities fell by almost a £1 billion from 2010-11 to 2018-19, but will recover slightly over 2019-20 and 2020-21.

  • Total support will remain

13.5% lower than 2010-11 levels in real terms…

  • … or 16.2% on a per-capita

terms.

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Total Welsh Government support provided through Aggregate External Finance (RSG + NDR) & Specific Grants

Total Welsh Government support Per-capita

75 80 85 90 95 100 105 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

2010-11 = 100

  • The value of Welsh

government funding to Welsh local authorities fell by almost a £1 billion from 2010-11 to 2018-19, but will recover slightly over 2019-20 and 2020-21.

  • Total support will remain

13.5% lower than 2010-11 levels in real terms…

  • … or 16.2% on a per-capita

terms.

Implications for Local Authorities

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  • Local authorities have

prioritised social services and – to a lesser extent – education.

  • Demand and cost pressures

associated with children and families’ social services have been one of the main drivers behind increased social services spending.

  • 60.0%
  • 40.0%
  • 20.0%

0.0% 20.0% Planning, development, coroners' and other courts services Libraries, culture, sport and recreation Transport Tax collection and core administration Environmental, waste and regulatory servies Education Council fund housing and housing benefit Social Services

Real terms percentage change in net current service expenditure, by local authority spending area between 2009-10 and 2018-19

Implications for Local Authorities

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Cynnwys / Contents

  • Day-to-day public spending on public

services

  • Capital budget
  • The outlook for future Welsh budgets

#WelshBudgetBriefing

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  • The Welsh Government’s capital budget will increase by 2.4% this year (£18

million additional from Spending Round 2019)

  • On top of existing plans for 2020-21, the Welsh Government allocated an

additional £545 million for capital spending in the Draft Budget

  • £145 million for decarbonisation and biodiversity projects

Budget for capital spending

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500 1,000 1,500 2,000 2,500 3,000 £ million Borrowing Financial Transactions CapDEL (excl. financial transactions)

  • 13% of the Welsh

Government’s capital budget is made up of ring-fenced and repayable ‘financial transactions’

  • The Welsh Government will

again borrow £125 million for capital spending in 2020-21.

  • £100 million unallocated

general capital spending for 2019-20 and £37 million in 2020-21.

Budget for capital spending

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Cynnwys / Contents

  • Day-to-day public spending on public

services

  • Capital budget
  • The outlook for future Welsh budgets

#WelshBudgetBriefing

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Outlook for day-to-day spending

  • Baseline scenario:
  • Day-to-day spending

increased in real terms to cover multi-year settlements for NHS and schools in England, leaving other departmental budgets flat in real terms

Baseline consequentials

200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2020-21 2021-22 2022-23 2023-24

£ million

Nominal terms consequentials for the Welsh budget for day-to-day spending

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  • There was only a very

limited amount of extra day-to-day spending in the Conservative party manifesto

Baseline consequentials Conservative 2019 manifesto plans

200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2020-21 2021-22 2022-23 2023-24

£ million

Nominal terms consequentials for the Welsh budget for day-to-day spending

Outlook for day-to-day spending

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  • Budget for day-to-day

spending growing above 2010-11 levels in real terms by 2022-23.

  • Growth in broadly in line

with forecast economic growth - as a share of the Welsh economy, spending will be stay at around 20% of GDP

Conservative 2019 Manifesto plans Baseline

14,000 14,500 15,000 15,500 16,000 16,500

£ million Welsh Government budget for day-to-day spending, 2019-20 prices

Outlook for day-to-day spending

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  • If the Welsh Government

grows NHS spending in real terms by 2.7% a year to 2023- 24, non-NHS spending increases slightly in real terms.

  • The share of the budget

going towards non-NHS spending will continue to fall.

Total NHS Non-NHS

80 85 90 95 100 105 110 115 120 125 130

2010-11 = 100 Average 2.7% annual growth

Outlook for day-to-day spending

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Non-NHS day-to-day spending as a share of the total

44% 46% 48% 50% 52% 54% 56% 58% 60%

Share of day-to-day spending

  • If the Welsh Government

grows NHS spending in real terms by 2.7% a year to 2023- 24, non-NHS spending increases slightly in real terms.

  • The share of the budget

going towards non-NHS spending will continue to fall.

Outlook for day-to-day spending

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Projections of Council Tax receipts based on assumptions about future growth in Council Tax levels

  • In 2023-24, receipts (net of

CTRS) are projected to amount to £1.66bn in our baseline scenario, £155m higher than if Council Tax had risen by inflation alone.

These growth rates refer to the average annual increase in the Band D equivalent rate, excluding the police precept. The police precept is assumed to grow in line with its 5-year average in each scenario (4.9%). Total receipts are presented net of the Council Tax Reduction Scheme (CTRS) and the projections are adjusted to account for historical collection rates.

Baseline increase (4.4%) Grow with inflation (~2%) Faster growth (6.2%)

200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 £ million

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  • The fall in revenue per

person for Welsh LAs since 2009-10 has been around 10 percentage points smaller than faced by English councils.

Changes in local authority gross revenue per person, by source (2009-10 to 2019-20, real terms)

Source: Authors’ calculations based on Harris, Hodge and Phillips (2019)

  • 17%

5%

  • 13%
  • 14%
  • 12%
  • 12%
  • 12%
  • 16%
  • 37%
  • 4%
  • 24%
  • 40%
  • 35%
  • 30%
  • 25%
  • 20%
  • 15%
  • 10%
  • 5%

0% 5% 10% Central grant funding and retained business rates Council tax Total (inc. education) Total (excl. education)

Wales Scotland England

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  • The fall in revenue per

person for Welsh LAs since 2009-10 has been around 10 percentage points smaller than faced by English councils.

  • This was largely due to

increasing Council Tax revenue and a slower growing population

Changes in local authority gross revenue per person, by source (2009-10 to 2019-20, real terms)

  • 17%

5%

  • 13%
  • 14%
  • 12%
  • 12%
  • 12%
  • 16%
  • 37%
  • 4%
  • 24%
  • 40%
  • 35%
  • 30%
  • 25%
  • 20%
  • 15%
  • 10%
  • 5%

0% 5% 10% Central grant funding and retained business rates Council tax Total (inc. education) Total (excl. education)

Wales Scotland England

Source: Authors’ calculations based on Harris, Hodge and Phillips (2019)

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Outlook for capital budget

  • Conservative manifesto
  • utlined over £8 billion of

additional capital spending by 2023-24 – which would result in approximately £450 million of consequentials for the Welsh capital budget

Consequentials for capital spending from Conservative 2019 manifesto commitments

50 100 150 200 250 300 350 400 450 500 2020-21 2021-22 2022-23 2023-24

£ million

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  • New fiscal rules creating room for big increase in capital spending
  • Likely worsening picture for the public finances this year

Uncertainty in the outlook ...

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Projected current budget surplus for 2022-23

  • “We can’t run an overdraft for

ever on our day-to-day spending” Sajid Javid, November 2019

  • Likely worsening picture for

the public finances this year…

  • ONS revisions
  • Spending commitments

already made

  • Slower growth

36.8 18.6 5.0

  • 17.0
  • 12.0
  • 18.1
  • 13.6
  • 20
  • 10

10 20 30 40

OBR forecast, March 2019 Restated OBR forecast, Dec 2019 Conservative manifesto, based on March forecast £ billion Conservative manifesto, restated ONS revisions Spending commitments Slower growth?

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  • New fiscal rules creating room for big increase in capital spending
  • Likely worsening picture for the public finances this year
  • ‘Triple-tax lock’ manifesto pledge could limit day-to-day spending growth
  • Big issues for the 2021 party manifestos to consider …

Uncertainty in the outlook ...

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Guto Ifan

DadansoddiCyllid Cymru, Canolfan Llywodraethiant Cymru, Prifysgol Caerdydd Wales Fiscal Analysis, Wales Governance Centre, Cardiff University

@WalesGovernance

Public spending in Wales

@Guto_Ifan

The End of Austerity and Beginning of Brexit: What are the implications for Wales?

Caerdydd / Cardiff 05/02/2020