No festive joy in the budget

In the week before Christmas the Welsh Government announced its draft budget for the upcoming year, which outlined how it would spend £23bn (80% of this comes from the UK Government through the block grant and the remaining comes from income raised through devolved taxes). Prior to this announcement, Welsh Government ministers had been busy preparing the public for bad news and the Finance Minister didn’t disappoint.

The budget clearly prioritises core NHS Wales services, with health and local councils the only areas which were not bit by cuts for the year ahead. This wasn’t a surprise given NHS Wales is contending with record-high waiting times and growing wage bills, while junior doctors are likely to go on strike in January 2024. The health service budget is set to increase by 4.4%, which is on top of the financial boost it received back in October. Despite this increase, some health-related services will be cut back, including mental health treatment, support for drug and alcohol misuse, and obesity and smoking prevention.

Local Councils provide many of the core public services that people rely on, including schools, bin collections, road repairs, libraries, and social care. While they also received an increase (3.5%), the amount that each council will receive varies. Newport will receive the largest percentage increase (4.7%), followed by Cardiff (4.1%) and Swansea (3.8%), while Conwy and Gwynedd will get the smallest increases at 2% each, followed by Caerphilly and Monmouthshire at 2.3%. Despite this increase, the future for Local Councils is bleak and they will need to make difficult decisions in terms of the service they provide and if they should increase the local taxes.

The rural sector was the biggest casualty of the budget. While the basic payment scheme for farmers was protected, the budget for rural affairs will be down 9.0%. This will be a devastating blow to the rural economy, and the associated food and drink industry, which is already facing huge uncertainty and higher costs. Tourism was another sector that came off poorly from the budget, with hikes in the takes they pay. Business rate relief for pubs and restaurants, which were brought in during the pandemic, will be cut from 75% to 40%. Comparable business rate relief remains at 75% in England which puts the Welsh sector at a disadvantage.

When adjusted for the Welsh government's measure of real terms, which takes inflation into account all areas apart from health have less to spend. In December, the Office for National Statistics announced that UK inflation slowed sharply in November to 3.9%. This was the lowest inflation rate since September 2021, and considerably lower than the 11.1% seen in October 2022. Despite the fall in inflation, prices remain high – lower inflation does not mean that prices come down. Tourism and the rural sector play an important part in North Wales economy, and the Local Council is the major employer in many parts of the region. Because of this, North Wales is likely to feel the pain of this budget more than other parts of Wales.