Facing mounting financial constraints due to inflation and escalating public sector pay, First Minister Mark Drakeford has tasked his cabinet ministers with identifying cuts to navigate the financial challenges currently confronting the Welsh government.
Drakeford has emphasized that the government is grappling with its “most challenging financial situation” since its establishment in 1999.
Throughout the summer, members of the cabinet will convene to scrutinize potential reductions within this year’s budget, as the Welsh government aims to address the fiscal squeeze.
Drakeford has laid the blame at the doorstep of the UK government, asserting that its failure to allocate additional funds following pay commitments has exacerbated the financial strain.
Within its £20 billion budget, overseen by the Labour-run administration, the Welsh government has disclosed a £900 million shortfall compared to its initial projections.
The public services funded by the Welsh government encompass the National Health Service (NHS), education, and council-managed services like social care.
At this juncture, the specific departments to be affected by the cuts remain undisclosed, with the cabinet considering adjustments for both the current and subsequent fiscal years.
The Welsh government predominantly relies on funding from the UK government, supplemented by some tax revenue.
Recent pay raises announced for educators and doctors in England did not translate to extra funds for the Welsh government due to their sourcing from existing UK government budgets. Consequently, pay agreements in Wales necessitate funding reallocations within the Welsh government’s own resources.
Notably, the Welsh budget is typically finalized at the commencement of the financial year in April. The need for substantial mid-year savings represents an exceptional situation.
In a written statement to the Members of the Senedd (the Welsh Parliament), Drakeford acknowledged the severity of the situation, noting, “This is the toughest financial situation we have faced since devolution.” He attributed the crisis to post-pandemic inflation, economic and fiscal mismanagement over the past 13 years by successive UK governments, and unfunded pledges by the UK government, particularly concerning public sector pay commitments.
The cabinet aims to mitigate these budgetary pressures while safeguarding frontline public services and targeting support for the most vulnerable. A comprehensive update will be presented to the Senedd once this deliberative process concludes.
The Welsh government has recently encountered criticism for discontinuing free school meal assistance during holidays, a move estimated to cost around £15 million. Additionally, the sudden withdrawal of £4.4 million for Covid sewage monitoring, despite inaugurating a research center a few months prior, has drawn attention, with both actions attributed to financial constraints.
Drakeford’s administration is navigating the challenges posed by negotiated pay agreements for NHS workers and teachers, as well as addressing NHS waiting lists. In parallel with broader society, the government contends with escalating costs amid persistent inflation, which stood at 7.9% in the year leading up to June.
Drakeford previously underscored the Welsh government’s financial standing, revealing it to be £900 million below what was initially anticipated in real terms during the UK government’s 2021 spending review.
