AN UNUSUAL all-party approach to the British Treasury was agreed in the Senedd today, the day that Finance Minister Rebecca Evans published the Welsh government’s final budget.
She said that the budget had been prepared as the government faced the most difficult financial situation since the start of devolution.
“The impact of persistently high inflation meant that our budget was worth £1.3 billion less in real terms than it was when it was set by the UK government in 2021,” Ms Evans said.
She explained that, unlike Westminster, the Welsh adminstration cannot borrow to fund day-to-day spending, instead relying on consequential funding from the British government under the Barnett formula, which often comes with little or no notice.
“We frequently see significant changes to our budget late in the financial year,” Ms Evans said.
“We also face rigid limits on our ability to carry forward or draw down funds from our reserves, which hamper our ability to plan and respond to changing circumstances.”
In moving the motion, which had been agreed by the Welsh Conservatives, Welsh Liberal Democrats and Plaid Cymru, the Finance Minister said: “I have repeatedly called for increased budget flexibilities to enable us to manage our funding more effectively.”
She told the Senedd that this included making caps on borrowing and overall reserves index-linked to inflation and removing the limits on the amount the government can draw down from its reserves in any given year.
“These flexibilities are available to Scotland and recent increases agreed to Northern Ireland’s annual capital borrowing limit are far more generous than our own,” Ms Evans said.
The motion set out two specific flexibilities — first, for the Welsh government to be able to review borrowing and overall reserve limits annually so that they are indexed to inflation; and, second, flexibility to permanently abolish its reserve draw-down limit, which restricts it to accessing only £125 million of resource and £50m of capital from reserves in any given year.
The Welsh Conservatives’ Peter Fox said: “I want to begin by recognising the fact that the Welsh government has limited fiscal levers and that the budgetary flexibility available to the Wales government are insufficient.
“It is important that the Wales government has greater predictability and certainty regarding its spending and funding arrangements to support its budget planning.”
