Wales’ finance minister challenged over budget cuts and financial risks

MSs questioned the finance minister about millions of pounds worth of cuts to the Welsh Government’s 2023/24 budget.

Rebecca Evans appeared before the finance committee to give evidence after announcing wide-ranging in-year cuts across most departments to prop up the NHS and rail services.

In October, Ms Evans told the Senedd that ministers are facing “extraordinary” financial pressures due to inflation, more than a decade of austerity and the fallout from Brexit.

‘Significant risk’

The finance minister said an extra £425m for the NHS and £125m for Transport for Wales is based on assumptions about consequential funding and drawdowns from reserves.

“There is a significant degree of risk there,” she warned.

“Lots of this is based on assumptions – it’s not firmed up yet.”

Peredur Owen Griffiths, who chairs the committee, questioned the government’s approach, suggesting it has “created confusion at best and some panic as well in some sectors”.

Ms Evans said it was a finely balanced decision but ministers wanted to be transparent rather than make cuts then include details in next February’s supplementary budget.

Reserves

Labour’s Mike Hedges asked how much will be left in reserves after the cuts, raising concerns that the Welsh Government could be vulnerable to overspends by health boards.

He said: “I only have to use the words ‘Betsi Cadwaladr’ which should bring you and other people in government out in a cold sweat because financial controls is one of those things they have never been very good at.”

Ms Evans said at the start of the financial year, the Wales reserve was £350m – which is the maximum ministers are able to carry over.

She explained: “Since then, our budget plans include a drawdown of £66m which reduces the available balance to £284m.

“We’ve suggested in our plans that we might use an additional £100m to address in-year pressure.

“That would leave us with money for unforeseen events … but the health minister has been very clear with health boards in respect of her expectations.”

Ms Evans stressed she has no more funding to provide to the NHS, while Andrew Jeffreys, Welsh treasury director, highlighted a statement issued by the health minister last week.

‘Knee-jerk’

Peter Fox, the Conservatives’ shadow minister, raised concerns about “significant” and “knee-jerk” in-year adjustments.

The Monmouth MS suggested the Welsh Government knew about inflationary pressures when the budget was initially set.

Ms Evans said budget plans were initially set in late 2021: “A lot of the work was done long before we could have anticipated exactly where we would be now.”

She added that ministers could not have anticipated the level of NHS pay deals, saying they were well in excess of assumptions and one of the big drivers of the budget gap.

She also pointed to the rising cost of medicines and energy.

Schools

Labour backbencher Jack Sargeant asked why extra funding for pay awards has been provided for the NHS but not teachers.

The Alyn and Deeside MS highlighted evidence from headteachers and governors which painted a “stark” picture of the financial constraints on schools.

Ms Evans said ministers protected core council funding as part of the 2023-25 budget cuts.

However, she recognised that school reserves have decreased significantly, saying: “It is fair to say that there are going to be difficult decisions made right across the public sector.

“We are taking this action in this financial year but we know that next financial year, the pressures are also going to be there.”

She suggested that councils could be given more flexibility around ring-fenced grants.

Consequentials

Mr Hedges asked about an extra £150m from Westminster and a £147m switch from long-term capital funding to day-to-day revenue spending.

Ms Evans said the only firm figure is £11.5m in consequential funding from UK Government spending decisions on winter pressures.

However, she said nothing the previous Chief Secretary to the Treasury has said leads her to believe that the assumptions are unrealistic.

She told the meeting on Wednesday November 15: “All we can do is press the UK Government to make a positive contribution to public services at the autumn statement.

“The facts are really stark in terms of the lack of funding to do everything we would want.”

By Chris Haines, ICNN Senedd reporter