Welsh spending faces £2.2 billion cut between 2011 and 2014

A new analysis of the UK 2009 Budget shows that for the first time since the founding of the National Assembly in 1999, there will be real terms cuts in public expenditure in Wales.

The analysis, carried out by fiscal expert Dr Eurfyl ap Gwilym, and published on the IWA’s website, predicts that between 2011-12 and 2013-14 there could be a cumulative loss in real terms of £2.2 billion compared with the position if funding remained at the 2010-11 level for each of the following three years. Of this reduction £0.7 billion is in current expenditure and £1.5 billion in capital expenditure.

What will happen to the Wales devolved budget in the three years 2011-12 to 2013-14 will be covered in the Spending Review now expected to take place after the next UK General Election. Whilst the 2009 Budget does not spell out the forecasts for Wales there is sufficient information in the Budget Red Book to come to an informed estimate based on two key statements by the Chancellor:

  • UK current expenditure will grow at 0.7 cent per year in real terms from 2011-12 onwards.
  • Public sector net investment will ‘move to’ 1.25 per cent of GDP by 2013-14. Moving to 1.25 per cent represents an average real cut of 17.2 per cent per year compared with current levels of 2.2 per cent of GDP.

Using this information allows an estimate to be made of the Departmental Expendiure Limit or the devolved budget for Wales up to 2013-14 and is set out in the following table. All estimates are in real terms, that is before allowing for inflation.

Download the full analysis here.

Dr Eurfyl ap Gwilym is a trustee of the IWA.

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