Written - The 2007 UK Budget and Lyons Report

The UK Budget was presented by the Chancellor of the Exchequer last week and it provided Wales with additional resources over the next four years.  Those resources are in addition to the allocations made in the Pre Budget Report (PBR) last December.  We expect further allocations to be made later this year as the UK Comprehensive Spending Review concludes.

As a result of the UK Government’s careful economic management we have enjoyed a period of strong and sustained growth in public spending over recent years.  Future growth is likely to be at more modest levels and certainly below the 6 per cent average real terms growth on the Assembly Departmental Expenditure Limit over the last 7 years.  Securing the maximum value for money in order to deliver high quality public services most effectively remains one of our top priorities.

The PBR and Budget have provided well over £1 billion to Wales in the next four years.  We have also received £10 million for next financial year - the final year of the current spending review period.  Between 2008-09 and 2010-11 Wales will receive an extra £1.156 billion as shown in the table below.  These resources represent the first part of the Barnett consequential allocations that will be generated by the CSR outcome.  

Comprehensive Spending Review

The £10 million for 2007-08 was allocated as part of the Assembly Government’s Final Budget approved by Plenary on 13 December 2006.   As the balance of the resources relate to the next budget period, we have no plans to make any decisions regarding their allocation until later this year.  The funding will be added to our central reserves, together with any further additions, and distributed in line with the policy aims and objectives of the new Assembly Government.

In making his statement, the Chancellor also made clear that the outcome of the UK CSR will not be announced until the autumn.  There are implications for the timing of the Assembly budget process and allowing sufficient time to consider and debate the Government’s proposals.  The new Government will consider how best to manage the situation.

On the same day as the Budget, Sir Michael Lyons published his report ‘Place-shaping: A shared vision for the future of local government’.  The report is about local government in England and Sir Michael has taken care not to consider local government in Wales.   The report is substantial and covers many issues.  We are pleased that in many areas it echoes what Jeremy Beecham has already said about public services in Wales as well the areas which we have already dealt with specifically through our policy statement on local government ‘A Shared Responsibility’.

Sir Michael highlights a number of areas where the funding mechanisms of local government could be reformed, particularly in the context of local taxation.  His findings will undoubtedly stimulate a widespread debate and we welcome the opportunity to consider these issues in Wales too.  As policy for local government in Wales is devolved it will be for the new Assembly Government to consider and to decide whether any of the recommendations have application here.

I am particularly pleased that Sir Michael has suggested moving the Council Tax Benefit system into a rebate and that that the upper capital threshold should be increased from £16k to £50k.  Such a reform is to be welcomed as it will mean that those who are entitled to benefits receive them automatically.  We pressed for this in our submission to the Inquiry. The UK Government has said that it will consider the proposals in the light of practicalities and affordability alongside priorities for the tax and benefit systems as a whole. I would urge them to implement the changes as quickly as possible.

Sir Michael has also said that business rates overall should be kept broadly as they are and that the RPI cap should be retained. Nonetheless, he has suggested some reform to the exemptions and reliefs that are available, for example that empty property relief should be reformed.   I welcome this move.  He has also signalled that local authorities should be given a power to raise a supplementary business rate for specific purposes. Again these are matters for the new Assembly Government to consider after the election.