Carwyn Jones, First Minister for Wales
Centre for Governance event, Cardiff University
2nd November 2010
Very soon now, the Welsh Assembly Government will publish its draft budget for the next three years. In the normal scheme of things you might have expected to hear from me at that point – but I wanted to set out some initial thoughts now. What I have to say is urgent and it is fuelled by two simple emotions: disappointment and determination. Disappointment over the way that Wales has been treated in the UK Government’s Spending Review, disappointment over the UK Government’s unwillingness to recognise and address the particular issues faced by Wales, and determination to stand up for the people of Wales and our public services in the face of poorly thought out cuts.
It’s clear that we’re facing our biggest challenge since devolution began. We did not need to be where we are. I believe the UK Government is going too far and too fast with its spending cuts. They will undermine fragile economic recovery within Wales, and undermine our last ten years of investment in schools, hospitals and critical infrastructure. Incidentally, it’s worth noting, that I am pleased that our concerns about the speed of the implementation of the cuts, were echoed in today’s YouGov poll – commissioned by Cardiff University Wales Governance Centre and Aberystwyth’s Institute of Welsh Politics. It proves the concerns that exist out there are not just coming from politicians and economists – there is growing unease amongst the public about the haste with which the deficit is being tackled, given the fragile state of the global economy.
The fact remains that we needed a Spending Review which would address the deficit and also contribute to economic recovery, a Spending Review that would be progressive in its impact on communities in Wales. What we have had fails on both counts, and the implications for Wales could be far-reaching.
David Blanchflower, the former Bank of England policymaker who saw the recession coming earlier than most, has described the spending cuts as the greatest macro-economic mistake in a century. And in recent days, the UK’s Nobel Economics Laureate, Christopher Pissarides, delivered a strong warning that cuts to social security benefits in the CSR, risked consigning jobless workers to a spiral of poverty and long-term unemployment. On the wider economic implications of the review, he said, and I quote:
“These risks were not necessary at this point. [George Osborne] could have outlined a clear deficit reduction plan over the next five years, postponing more of the cuts, until recovery became less fragile. The ‘sovereign’ risk would have been minimal.”
On the back of all that came the PriceWaterhouse Coopers report which warned of a disproportionate impact on Wales and the loss of 50,000 jobs as a result.
We have been clear that we will be a responsible partner in contributing to the reduction of the UK’s fiscal deficit. We will pay our share. But I am convinced that the UK Government has not been fair to Wales in how it has made these cuts, and I will explain the reasons why.
First, these are the biggest cuts in our budgets in living memory. In real terms, they amount to a reduction of £1.8bn over the next four years, £860m of which comes out of our budget next year. This is a massive challenge. Our public services are critical to the fabric of our society. We have a distinct approach to public services within Wales, a cooperative model that England finds hard to emulate. However, the cuts will put real pressure on our ability to meet the needs of our population with the same high standards of service and care that have developed over the last ten years.
Second, the wider welfare cuts at UK level will hit Wales disproportionately hard, given our historical legacy of poverty and vulnerability. The cuts in housing benefit, employment allowance, disability allowance, and changes to tax credits will deepen inequality and mar the prospects of many of our young families. These actions risk pushing some of the poorest and most vulnerable in our communities further below the poverty line. The recent report by Consumer Focus Wales (soon to be abolished of course!) on growing indebtedness among older people illustrates the risks we face.
The UK rhetoric of fairness is evaporating under the forensic searchlight of experts like the Institute of Fiscal Studies, an independent body, which is in no one’s pocket. Their measured conclusion is that the impact of the tax and benefit changes reduces the income of lower income households by more than that of higher income households, with the notable exception of the richest 2%. Low-income families with children are set to lose around 5% of their net income.
The UK Spending Review is clearly regressive. The human and social impact could be both devastating and wasteful: the real cost could be with us for generations. As Professor Tony Judt said, ‘inequality is not just morally troubling, it is also inefficient’.
Third, our capital allocation for the next four years decreases by 41%, compared to a UK average of 29%. Next year alone, our budget for our critical infrastructure will be 25% lower than it is this year. This is on top of the UK Government’s disregard for Wales in its own decisions. The announcement – or indeed lack of announcement – on the future of the Defence Academy at St Athan, the decision not to include Wales in sites for the new superfast broadband pilot areas, to close the Newport Passport Office. All these projects could have helped to support Wales’ economic recovery.
The casual assumption that the private sector will provide jobs for those who become unemployed from the public sector is, as many economists have pointed out, risky. For Wales the stakes are higher. Public investment plays a greater role in our economy than in England and our business sector is much more fragile.
A final point about the lack of fairness in the Spending Review. The Holtham Commission Second Report conclusively demonstrated that Wales is already underfunded by around £300m a year. The UK Government has not disputed our evidence, but has still refused to implement a floor. Indeed they have linked Holtham with the March Referendum. A ‘No’ vote means no more money.
Let me turn then to our response. The one thing that the people of Wales can be assured of is that the Government I lead will take its responsibilities seriously. We will do the best we can in the current circumstances and with the money we have been allocated. We will not shirk the challenges before us. That is why, as you will all be aware, we have been planning for a long time for this budget. We have confirmed our commitment to keep our job-creating capital investment programmes this year, as a key component of our Economic Renewal Strategy, which has been leading Wales out of the recession.
We have been clear that we will be protecting investment in schools, skills and healthcare, and we remain committed to maintaining progressive universal entitlements – including the successful concessionary fares scheme, free prescriptions, free swimming and free breakfasts & milk for primary school children. We are committed to ensuring that our budgetary decisions do not disproportionately impact on our least-advantaged people.
There are difficult balances to be struck. We have to work on two fronts: on one we have to achieve equity in our services and support for individuals, on the other we have to build our capacity to intervene earlier and more effectively to break the long-term cycle of deprivation, ill-health and low skills. This is a bold ambition. It is sometimes not well understood that we do not desire to be judged only on our short-term effectiveness or delivery of targets in one particular area. We stand to be judged on a coherent and distinctive approach which invests in the long-term well-being of the people of Wales.
Over the last 10 years, we have built a relationship of trust with the public which is essential to underpin change. We do not yet know what the real impact of the deep welfare cuts will mean for our communities. Within a regressive UK tide, we will be rowing hard the other way. That means we have to make the Welsh pound go further, promoting radical change to reduce cost and improve delivery, while holding true to our fundamental beliefs in equality and the power of progressive politics.
Our distinctive approach to public services
- Putting people first;
- Working together collaboratively to deliver better services;
- Developing a world class workforce;
- Securing better value for the Welsh Pound; and
- Relentlessly driving change.
We have now established a wide-ranging and distinctive programme of change for Welsh public services, which I want to summarise. Our clear priorities are NHS Wales, education, social services and local government. Part of this improvement is enabled by securing greater efficiency – so that we can concentrate resource on the front-line and improve delivery.
Beecham advocated making the scale of Wales work for us. In health, for example, we have already changed the scale of delivery to drive integration and make better use of the skills of the workforce. We have taken out the bureaucratic internal market and created a streamlined structure which is focussed on improving patient outcomes and using resource more efficiently.
As well as the implementation of the NHS changes and the widely welcomed Essex Review on social housing, work is well on the way for other services:
- the Commission on Social Services, which is due to report very shortly, will chart a more sustainable future for care of the vulnerable;
- the Front-line Resources Review in Education announced earlier this year will shift resources from administration to the classroom; and
- we are now reviewing which local government services are best delivered locally, regionally and nationally.
Our Public Services Summits, led by an Efficiency & Innovation Board, are driving change in key areas, from procurement and asset management on the efficiency side; to progressive approaches to high cost services like public protection, independent living for older people and complex families on the innovation front. PriceWaterhouse Coopers has referred to our Summits and the Board as ‘building a coalition for change’. The approach is unique and the resulting momentum is encouraging.
Mobilising energy at all levels of our public services, especially front-line staff, is crucial. Our Local Service Boards bring together local service leaders and Assembly Government officials to make real differences for their communities – tackling issues such as enabling older people to live independently in Carmarthenshire, integrating services around vulnerable children in Rhondda Cynon Taff, supporting those with mental health issues in North Wales and reducing crime in Cardiff. Recent Home Office crime figures, for example, showed that crime decreased by 12.5 per cent in Cardiff during the 12 months to June 2010. The South Wales Police, who sit on the local service board, have identified local partnerships as a key to that improvement. I have to wonder whether an elected Police Commissioner would be able to do better? If it ain’t broke, don’t fix it!
We do not need an English model. In England the approach is to cut the budget, work in silos and leave services to make the best they can of it. In Wales, helped by our scale and culture, we share a vision and are building concerted action to achieve better outcomes for our communities. We saw this distinctive approach in the way that public services and social partners came together to lead Wales out of the recession and is something which stands us in good stead to take on this financial challenge.
Placing the citizen at the centre
In the 1980s it was said by some that there was no such thing as society. Then we had the “broken society” and now we have the Big Society. Well, the Big Society is no big deal. We don’t have to rediscover society in Wales. We have always been, and we will always be, a real community in Wales. It is part of our life-blood, and community ownership of local public services runs very deep. We don’t take this for granted and the distinctive approach to public services in Wales includes designing services around the citizen. The citizen has to be a partner rather than a passive recipient. This is critical to success, as we have seen with the expert patient scheme where the patient is supported by clinicians in managing their chronic conditions.
Above all, there has to be a relationship based on trust with the public, a shared endeavour to make Wales a better place; and I have seen this in young people’s participation through Funky Dragon and strong advocacy of real peoples’ voices through the Children’s and Older People’s Commissioners.
Welsh communities have traditionally shown resilience in tough times. Our long-term programmes, such as Communities First, have helped some of our most deprived localities to help themselves. We must maintain a strong emphasis on developing skills and capacity in our communities. Some of our housing associations are organising themselves as community mutuals and showing what can be done to stimulate local regeneration. From Dwr Cymru to local co-operatives, we are seeing different forms of not-for-profit operations and social enterprises. These approaches understand the value of putting communities, not bureaucracies at the heart of service delivery.
I think similarly about our workforce. The distinctive Welsh approach is based on the great strength of our relationships with social partners and the deep commitment of our public service workforce. In England there is a sense that social partners and the workforce are somehow the problem, rather than the solution. I see things very differently. As I toured public services this summer, I saw at first hand the enthusiasm and expertise at work in our services.
There are tough decisions ahead and these will inevitably impact on staff. We have to work with them – and their unions – in finding a way through. Over more than 10 years, since devolution began, we have approached public services in our own way. Our first steps were, perhaps, hesitant and faltering. We have become increasingly ambitious over time and now have a sharper sense of what can work in Wales.
After working so hard, for so long, we are not about to throw in the towel. Everyone would prefer to deliver public services with expanding budgets. Today that’s not an option – it’s simply not the position we’re in. But for Wales in 2010 there is one saving grace. We’ve faced economic difficulties before. The difference is that today’s Wales is a devolved Wales, where we can make our own choices. It is also a more confident Wales – ready and more than able to take the next step ahead.
My Government has already set out our priorities. They are based on the principle of chwarae teg, fair play for all our people. That’s the principle we’ve applied to advancing our National Health Service, invented here in Wales. The same principle means we are ensuring decent resources for housing in Wales – a ‘casual casualty’ of the spending round at the other end of the M4, yet vital for tackling ill-health. And fair play means we are prioritising the money available to develop the talents of our nation – from the Foundation Phase, which fosters an early love of learning, Learning Pathways for young people, and our strong emphasis on skills and lifelong learning in later life.
These are Welsh priorities – our pathway to a better future. And whatever the difficulties that lie ahead, those are the priorities I am determined to deliver.