Wales politics

Analysis of Welsh Assembly Government draft budget

Wednesday's draft budget from the assembly government will define the shape of Welsh politics for the next three years - and probably beyond.

This is when we will find out where the cuts to public spending, warned of for years, will really start to bite.

The UK government's Spending Review last month means the money the assembly government has for day-to-day spending like public sector wages will increase slightly in cash terms over the coming years - but its infrastructure budget for building and maintaining schools, hospitals and roads will fall dramatically.

Despite the small cash increase, there will still have to be very difficult decisions on day-to-day spending, as inflation will eat away at it - meaning it will feel more like cuts in real terms.

With an assembly election looming in May next year, it will also be an intensely political budget.

Labour and Plaid Cymru ministers know that these will be the priorities they will take to the voters, while the Conservatives and Liberal Democrats will offer alternative visions of how they would take Wales forward amid the cuts.

Battleground

The biggest political battleground will focus on the biggest single area of the budget - health spending.

The Conservatives have already pledged they would increase the entire £6bn health budget in line with the retail price index every year, currently running at around 4.5% a year.

However, this would mean some very difficult decisions elsewhere in the budget in areas like education, environment and economic development - cuts of up to 20% which the Conservatives have not yet spelled out in any detail.

The other three parties are acutely aware that their policy of not increasing the whole health budget in line with inflation leaves them open to accusations they are inflicting real terms cuts in an area that is at or near the top of most voters' priorities.

Expect them to focus on the Conservatives lack of detail to try and blunt this attack.

Priorities

The assembly government have been clear about their budget priorities for some time now.

They say that with cuts inevitable, they will do their best to protect schools, skills and hospitals, and ensure that increasingly scarce resources get through to the frontline so that services are maintained.

Crucially, they will not pledge to ring-fence entire budgets like health or education, which gives them more flexibility elsewhere.

The Liberal Democrats are choosing to focus on outcomes rather than allocations - they will argue that smarter, more efficient working within the public sector means that cuts to services will not have to be as severe.

They also would not ring-fence health - but in terms of education they want more money made available to the poorest pupils in Wales.

The one area that all four parties have to grapple with is the dramatic fall in capital, or infrastructure spending in the coming years.

Those who know what is in Wednesday's budget say this is the area which will suffer the greatest pain - and where the most difficult decisions will be made.

Impact

A 40% cut over the next four years means that many big hospital, school and road schemes will have to be put on hold for several years.

Although this will not have the same impact on the public consciousness as the large scale job losses that would be caused by big reductions in day to day spending, there will be many thousands of people up and down the country who have campaigned for years for improvements to their local roads, for a new hospital, or a new school who are likely to be disappointed as a result of the budget.

Much of the capital budget is spent in the private sector too, with construction and maintenance contractors, and ministers also fear this could have an impact on jobs as work dries up.

All in all, expect a draft budget of tough choices - but remember the implications of many of those choices will not be felt for many months or even years.

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