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Hammer and tongs

Betsan Powys | 10:10 UK time, Thursday, 21 October 2010

So George hammered the dragon - or he gave the dragon a tough but fair going over - it depends on whom you choose to believe this morning.

The same arguments are being rehearsed in Scotland so let's just run through them quickly:

The Treasury says that that their starting baseline for the Assembly Governmen's 2010 -11 budget - this year - is £15.0bn. This figure takes out the in-year cuts and certain projects and schemes which are coming to an end. Next year they say it will be £14.6bn.

The Assembly Government say that the Treasury have artificially reduced the baseline by stripping out the various items above. They say it should be £15.12bn, which is how much they're actually spending this year - so there's £120m off their budget to start with. Then they say that the £14.6bn cash figure should be adjusted for inflation which means that it is actually £14.2bn in real terms.

For them, then, the cut is actually £900m not £400m. They don't quite say the figures have been fiddled but they're not far off it.

It's fair to say that this sort of dispute has arisen every time there's been a spending review but it's worth noting that this is the first time there've been different parties in charge at both ends of the M4.

Whatever the merits of either side, there is no question that on the revenue, or day to day spending side, the settlement is better than the scenario they had been planning for.

They had planned for a three per cent cut in cash terms every year for four years. In fact, in cash terms, the revenue budget will actually rise slightly over the four years. So as Jane Hutt finalises the Assembly Government budget to be published on November 17, she'll actually be putting money back into departments planned revenue budgets rather than taking it out.

She would argue that responsible governments always plan for the worst and it's a lot easier to put money back in rather than take it out but the prediction of the 3% annual cash cut was used so often by ministers over the last few months that it effectively took on the status of the official position of the Assembly Government.

On the capital - or infrastructure - side, the picture is pretty much as grim as ministers had predicted. There are going to have to be some really hard decisions about which big road, hospital or school building projects now get the go ahead and remember maintenance budgets come out of capital too.

A virtue of the pessimistic planning is that departments have been hanging back from signing big contracts in anticipation of the capital cuts but you get the impression that the scale of it has still taken them aback.

So yes, there are always arguments about baselines and percentages, cash and real terms but this time it's more extreme and more damaging - hence, say Labour and Plaid, the dragon has been hammered.

And why has it taken such a hammering? Because, said the First Minister and his Deputy this morning, Wales has too little clout around the cabinet table. In other words it's the Secretary of State's fault. Cheryl Gillan let us down. All this talk of the settlement being better than it might have been is a nonsense - let alone the truly devastating impact to come of public sector job losses and benefit cuts.

Which of the devolved nations has been hit hardest in percentage terms? It's Wales. The cut to the day-to-day spending of the Welsh government is 7.5% in real terms and another 41% reduction in capital funds. But the comparable allocation for the Scottish Executive will be a reduction of 6.8% in revenue and 38% in capital. In Northern Ireland, it will be 6.9% revenue, and 37% in capital.

And there you have the latest evidence say the governing parties in Wales - and these are, after all, the Treasury's own figures - that Wales has taken a bigger hit than its devolved cousins. The difference may be slight but it's there and falls neatly into the narrative: that Wales is under Tory attack.

When I interviewed Nick Bourne and Peter Black on Wales Today last night it was hard not to sense the relief coming from them. The electoral nuclear weapon of the spending review has turned out not to be quite so explosive after all. It's bad - very bad - but perhaps not the devastating, knock-out blow they and their parties in Wales had feared.

And if the Labour and Plaid Cymru strategists had already written their plan of attack for May 2011, there are one or two who'll quietly admit that by the time George Osborne sat down yesterday, it needed just a little tweaking.


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