{"id":1084,"date":"2020-05-26T08:09:17","date_gmt":"2020-05-26T07:09:17","guid":{"rendered":"http:\/\/blogs.cardiff.ac.uk\/thinking-wales\/?p=1084"},"modified":"2022-04-13T17:25:09","modified_gmt":"2022-04-13T16:25:09","slug":"funding-the-response-to-covid-19-looking-ahead-to-an-unprecedented-supplementary-budget","status":"publish","type":"post","link":"https:\/\/blogs.cardiff.ac.uk\/thinking-wales\/funding-the-response-to-covid-19-looking-ahead-to-an-unprecedented-supplementary-budget\/","title":{"rendered":"Funding the response to COVID-19: looking ahead to an unprecedented Supplementary Budget"},"content":{"rendered":"\n

Welsh Government Supplementary Budgets do not usually garner much attention. Given the momentous events since the Welsh Government published its Final Budget allocations in March, tomorrow\u2019s supplementary budget will be different. It may perhaps be the most significant budget \u2018event\u2019 in the history of devolution. <\/p>\n\n\n\n

The scale of additional funding to be allocated in this supplementary budget is simply unprecedented. The average additional allocations to Welsh Government departments made at 1st<\/sup> supplementary budgets over the course of this Welsh parliamentary term was \u00a3136 million. Tomorrow\u2019s increases will be over seventeen times that amount, with arguably more to come at a later date. As a rough comparison, the Welsh budget will have increased by more in three months than it did during its first three years under the New Labour government. <\/p>\n\n\n\n

This blog post outlines the UK government\u2019s fiscal response, tracks the additional resources at the disposal of the Welsh Government, and analyses what we can expect from tomorrow\u2019s supplementary budget.<\/p>\n\n\n\n

UK government finances<\/em><\/p>\n\n\n\n

The Office of National Statistics\u2019 release of data on the public sector finances for the month of April 2020 revealed the huge impact of the COVID-19 crisis on government revenues and spending.[1]<\/a> Reduced revenues (particularly from VAT) and increased public sector spending (particularly on the government\u2019s furlough scheme) meant public sector borrowing surged to record levels. <\/p>\n\n\n\n

The UK public sector borrowed a similar amount in one month to what was forecast by the Office for Budget Responsibility (OBR) for the entirety of 2020-21 just two months ago at the March 2020 Budget. The OBR have since published a \u2018coronavirus reference scenario\u2019, projecting borrowing of \u00a3298 billion for 2020-21, which seems in line with the published outturn figures.[2]<\/a><\/p>\n\n\n\n

The latest projected cost of the UK government\u2019s direct fiscal policy response amounts to \u00a3123.2 billion.[3]<\/a> The impact on the Welsh Government budget comes from the \u00a315 billion increase in spending on public services and a \u00a328 billion package of support for businesses through business rates reliefs and grants. <\/p>\n\n\n\n

By far the largest cost for the UK government is in the form of employment support including the coronavirus job retention scheme and the self-employment income support scheme, which have a combined net cost of around \u00a361 billion.<\/p>\n\n\n\n

Funding the Welsh Government fiscal response<\/em><\/p>\n\n\n\n

The UK government\u2019s Budget 2020 had already resulted in \u00a3364 million of additional funding for the Welsh Government (mainly for capital spending). Over subsequent months, this has been dwarfed by additional consequentials<\/em> resulting from a stream of coronavirus-related funding announcements made by the UK government in England, summarised in Figure 1<\/strong>. The amount of available funding has grown substantially since we published our initial update on the Welsh Government budget last month (April 9).[4]<\/a><\/p>\n\n\n\n

Figure 1: Additional funding available for the Welsh Government to fund its\nfiscal response to covid-19[5]<\/strong><\/a><\/h4>\n\n\n\n
\n Consequentials from Budget 2020 (11 Mar)<\/strong>\n <\/td><\/tr>
\n  \n <\/td>\n \u00a3 million\n <\/td><\/tr>
\n Total<\/strong>\n <\/td>\n 364<\/strong>\n <\/td><\/tr>
\n  \n <\/td>\n  \n <\/td><\/tr>
\n Coronavirus response funding for the Welsh Government<\/strong>\n <\/td><\/tr>
\n  \n <\/td>\n \u00a3 million\n <\/td><\/tr>
\n Budget measures (11 Mar)\n <\/td>\n  \n <\/td><\/tr>
\n LA hardship fund\n <\/td>\n 29\n <\/td><\/tr>
\n Business rates reliefs\n <\/td>\n 65\n <\/td><\/tr>
\n Business support grants\n <\/td>\n 120\n <\/td><\/tr>
\n Response fund (11 Mar)\n <\/td>\n 250\n <\/td><\/tr>
\n Business package (17 Mar)\n <\/td>\n 1,180\n <\/td><\/tr>
\n Charities (8 Apr)\n <\/td>\n 20\n <\/td><\/tr>
\n National Lottery Community\n Fund (8 Apr)\n <\/td>\n 18\n <\/td><\/tr>
\n Increase to response fund (13\n Apr)\n <\/td>\n 355\n <\/td><\/tr>
\n Local government funding (18\n Apr)\n <\/td>\n 95\n <\/td><\/tr>
\n Care homes in England (15\n May)\n <\/td>\n 35\n <\/td><\/tr>
\n Transport for London (19 May)\n <\/td>\n 65\n <\/td><\/tr>
\n Total<\/strong>\n <\/td>\n 2,232<\/strong>\n <\/td><\/tr>
\n  \n <\/td>\n  \n <\/td><\/tr>
Reprioritised funding from own budget and EU funding<\/strong> <\/td><\/tr>
\n  \n <\/td>\n \u00a3 million\n <\/td><\/tr>
\n Total<\/strong>\n <\/td>\n 500<\/strong>\n <\/td><\/tr><\/tbody><\/table>\n\n\n\n

Coronavirus-related funding from\nthe UK government now amounts to over \u00a32.2 billion, the largest part triggered\nby business rates reliefs and grants. On top of Budget 2020 consequentials<\/em>,\nit means total additional funding available for the Welsh Government to\nallocate at this supplementary budget is approximately \u00a32.6 billion (\u00a32.3\nbillion of which is revenue funding for day-to-day spending).<\/p>\n\n\n\n

In addition, the Welsh Government announced it had reprioritised and repurposed \u00a30.5 billion from within its own budget and in EU funding to fund its fiscal response.<\/p>\n\n\n\n

This means that available funding\nfor day-to-day spending will be 15% higher than what was set out at the Final\nBudget 2020.[6]<\/a> To\nput this increase in context, Figure 2<\/strong> plots the path of the Welsh Government budget for\nday-to-day spending since 2010-11 in real terms. After gradually growing over\nrecent years, additional coronavirus response funding will mean spending in\n2020-21 will be 12% higher than 2010-11 levels.<\/p>\n\n\n\n

Figure 2: Welsh Government budget for day-to-day spending, 2010-11 to 2020-21\n(2019-20 prices)[7]<\/strong><\/a><\/h4>\n\n\n\n
\"\"<\/figure>\n\n\n\n

Ironically, funding for day-to-day\nspending in the Welsh budget will be similar in 2020-21 to what it would have been\nin 2022-23 under the spending plans outlined in Labour\u2019s General Election 2019 manifesto.[8]<\/a><\/p>\n\n\n\n

Welsh Government allocations <\/em><\/p>\n\n\n\n

The Welsh Government\u2019s fiscal\nresponse to date includes a \u00a31.3 billion package of non-domestic rates reliefs\nand grants, largely mirroring policies implemented in England.[9]<\/a>\nIt also includes a \u00a31.1 billion package to support the economy and public services.<\/p>\n\n\n\n

Tomorrow\u2019s supplementary budget will provide a further breakdown of the fiscal response, though most of the economy and public services package has already been allocated to various priorities. A significant portion will go towards funding the health and care response to covid-19, with the health and social care budget set to increase by \u00a30.5 billion. This increase will include funding for the \u00a3500 extra payment for care staff in Wales, worth around \u00a332 million. <\/p>\n\n\n\n

Another large part of the\nresponse has been allocated to the Economic Crisis Fund, comprised of \u00a3400\nmillion in grants and \u00a3100 million of loans for businesses.<\/p>\n\n\n\n

Around \u00a3114 million has been\nallocated to support local authorities\u2019 budgets, including \u00a340 million for adult\nsocial care, \u00a340 million for additional free school meal provision and \u00a310\nmillion for homelessness services. <\/p>\n\n\n\n

While this extra support for local government may meet additional demand pressures for local authorities, another concern has been the impact on their income. Income from sales, fees and charges amount to approximately \u00a31 billion a year for Welsh local authorities, and a high-level estimate from the WLGA suggested they would lose around \u00a333 million of income for every month of lockdown. Local authorities will be hoping for further funding announcements to address this shortfall.<\/p>\n\n\n\n

Since the Welsh Government announced its original \u00a31.1 billion package for the economy and public services at the end of March – funded by a mixture of consequentials<\/em> and repurposed spending from its own budget and EU funding \u2013 announcements by the UK government have led to \u00a3588 million of additional funding. <\/p>\n\n\n\n

Tomorrow\u2019s supplementary budget may therefore provide an opportunity to increase the size of the overall Welsh Government fiscal response. <\/p>\n\n\n\n

While Minister for Finance Rebecca Evans may not allocate all this additional funding tomorrow, the prolonged nature of this crisis makes it likely further funding announcements will be on their way.
<\/p>\n\n\n\n

\n\n\n\n

[1]<\/a>\nAvailable at: https:\/\/www.ons.gov.uk\/economy\/governmentpublicsectorandtaxes\/publicsectorfinance\/bulletins\/publicsectorfinances\/april2020<\/a>\n<\/p>\n\n\n\n

[2]<\/a>\nAvailable at: https:\/\/obr.uk\/download\/coronavirus-reference-scenario-the-obrs-coronavirus-analysis\/<\/a>\n<\/p>\n\n\n\n

[3]<\/a>\nAvailable at: https:\/\/obr.uk\/download\/coronavirus-policy-monitoring-database-14-may-2020\/<\/a>\n<\/p>\n\n\n\n

[4]<\/a>\nAvailable at: https:\/\/www.cardiff.ac.uk\/__data\/assets\/pdf_file\/0005\/2132654\/COVID19_Welsh_Budget_FINAL.pdf<\/a>\n<\/p>\n\n\n\n

[5]<\/a>\nSome figures on consequential funding estimated from available information, in\nthe absence of HM Treasury Block Grant Transparency data.<\/p>\n\n\n\n

[6]<\/a> It\nshould be noted most of this increase will go towards non-domestic rates relief\nand grant funding rather than on public services.<\/p>\n\n\n\n

[7]<\/a>\nFor methodology, see figure 2 here: https:\/\/www.cardiff.ac.uk\/__data\/assets\/pdf_file\/0004\/1788628\/WFA-Spring-Budget-2020.pdf<\/a>\n<\/p>\n\n\n\n

[8]<\/a> See:\nhttps:\/\/www.cardiff.ac.uk\/__data\/assets\/pdf_file\/0011\/1736768\/Manifesto_analysis_v3.pdf<\/a>\n<\/p>\n\n\n\n

[9]<\/a> Except\nfor the exclusion of reliefs to properties in the retail, leisure and hospitality\nsector valued over \u00a3500,000, releasing \u00a3117 million.<\/p>\n","protected":false},"excerpt":{"rendered":"Welsh Government Supplementary Budgets do not usually garner much attention. Given the momentous events since the Welsh Government published its Final Budget allocations in March, tomorrow\u2019s supplementary budget will be […]","protected":false},"author":1297,"featured_media":860,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[143,60,1],"tags":[],"class_list":["post-1084","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-covid-19","category-finance","category-uncategorized"],"jetpack_publicize_connections":[],"jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p8iFWs-hu","meta_box":[],"jetpack_featured_media_url":"https:\/\/blogs.cardiff.ac.uk\/thinking-wales\/wp-content\/uploads\/sites\/509\/2019\/09\/800px-Senedd_1.jpg","_links":{"self":[{"href":"https:\/\/blogs.cardiff.ac.uk\/thinking-wales\/wp-json\/wp\/v2\/posts\/1084","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.cardiff.ac.uk\/thinking-wales\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.cardiff.ac.uk\/thinking-wales\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.cardiff.ac.uk\/thinking-wales\/wp-json\/wp\/v2\/users\/1297"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.cardiff.ac.uk\/thinking-wales\/wp-json\/wp\/v2\/comments?post=1084"}],"version-history":[{"count":7,"href":"https:\/\/blogs.cardiff.ac.uk\/thinking-wales\/wp-json\/wp\/v2\/posts\/1084\/revisions"}],"predecessor-version":[{"id":1092,"href":"https:\/\/blogs.cardiff.ac.uk\/thinking-wales\/wp-json\/wp\/v2\/posts\/1084\/revisions\/1092"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blogs.cardiff.ac.uk\/thinking-wales\/wp-json\/wp\/v2\/media\/860"}],"wp:attachment":[{"href":"https:\/\/blogs.cardiff.ac.uk\/thinking-wales\/wp-json\/wp\/v2\/media?parent=1084"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.cardiff.ac.uk\/thinking-wales\/wp-json\/wp\/v2\/categories?post=1084"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.cardiff.ac.uk\/thinking-wales\/wp-json\/wp\/v2\/tags?post=1084"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}