{"id":1162,"date":"2020-07-17T08:30:53","date_gmt":"2020-07-17T07:30:53","guid":{"rendered":"http:\/\/blogs.cardiff.ac.uk\/thinking-wales\/?p=1162"},"modified":"2022-04-13T17:25:09","modified_gmt":"2022-04-13T16:25:09","slug":"covid-confusion-and-consequentials-how-much-funding-will-the-welsh-government-get-from-the-summer-statement","status":"publish","type":"post","link":"https:\/\/blogs.cardiff.ac.uk\/thinking-wales\/covid-confusion-and-consequentials-how-much-funding-will-the-welsh-government-get-from-the-summer-statement\/","title":{"rendered":"Covid, confusion, and consequentials: how much funding will the Welsh Government get from the Summer Statement?"},"content":{"rendered":"\n

As\nusual, the UK Chancellor\u2019s \u201cmini budget\u201d on 8 July was followed by claims, counterclaims,\nand confusion<\/a>\nover the amount of additional funding for the Welsh budget.<\/p>\n\n\n\n

The\nUK government claimed, \u201cthe Summer Economic Update confirms an\nadditional \u00a3500 million<\/a> of Covid-19 funding for the Welsh Government\nthrough the Barnett formula.\u201d<\/p>\n\n\n\n

Later,\nthe Welsh Government said it would be getting only\n\u00a312.5 million<\/a> in consequentials as a result of the Summer Statement.<\/p>\n\n\n\n

So,\nwho and what is to be believed? <\/p>\n\n\n\n

Consequentials\nfrom the UK government\u2019s Plan for Jobs<\/strong><\/p>\n\n\n\n

In\nthe latest stage of the fiscal response to Covid-19, the UK chancellor set out\nmeasures costing \u2018up\nto\u2019 \u00a330 billion<\/a>. Most announcements apply across the UK, from the Job\nRetention Bonus Scheme, to the \u2018Eat Out to Help Out\u2019 meal subsidy scheme.<\/p>\n\n\n\n

However,\nthe \u00a32 billion Green Homes Grant and \u00a3400 million for traineeships,\napprenticeships, school leavers, and careers advice in England, represent policy\nareas devolved to Wales, which would normally trigger consequentials for the\nWelsh Government. This is why the \u00a312.5 million figure quoted by the Welsh\nGovernment seemed implausibly small at first glance. <\/p>\n\n\n\n

However,\nit is now clear<\/a> that all\nof the Green Homes Grant scheme and about half of the traineeships-related spending\nwill be funded from within pre-existing budgets. Since only a fraction of this is\n\u2018new\u2019 money, the consequential is therefore considerably smaller than expected.\nIf the Welsh Government wishes to replicate these schemes, it will need to\nre-prioritise existing spending plans.<\/p>\n\n\n\n

One\nwould also usually expect consequentials from the \u00a35.6 billion of\ninfrastructure investment package (the so-called \u2018New Deal\u2019 announcement). However,\nas well as being funding brought forward from previously planned investment, it\nwill also be funded by underspends on capital projects this <\/em>year. Hence,\nno additional consequentials for capital projects in Wales.<\/p>\n\n\n\n

Consequentials\nfrom the Stamp Duty holiday<\/strong><\/p>\n\n\n\n

What\nis not<\/em> counted in the \u00a312.5 million figure is the potential implications\nfor the Welsh budget stemming from UK government\u2019s Stamp Duty Land Tax temporary\ncut. Applying to transactions in England and Northern Ireland, increasing the\n0% threshold to \u00a3500,000 will cost \u00a33.8 billion (based on March 2020 forecasts).\n<\/p>\n\n\n\n

Because\nthe policy will lower revenues in England and Northern Ireland, it will\ndecrease the Welsh Government\u2019s Block Grant Adjustment (BGA). This is the\namount taken away from the Welsh block grant to account for devolution, and changes\nfrom year to year are linked to comparable UK government revenues. Based on\ncurrent forecasts, the BGA would fall by roughly \u00a377 million as a result of\nthis policy.<\/p>\n\n\n\n

The\nWelsh Government has since responded by increasing the threshold for paying\nLand Transaction Tax to \u00a3250,000.[1]<\/a>\nThere was some confusion around the claim that the tax cut will \u201cfree\nup\u201d<\/a> \u00a330 million for spending on social housing. It was rather the decision\nnot to replicate UK government policy (or not to pass on all of the \u00a377 million\nin the form of tax cuts in Wales) which has allowed more funding for social\nhousing. The tax cut itself has presumably cost roughly \u00a347 million.<\/p>\n\n\n\n

Wider\nCovid-19 consequentials <\/strong><\/p>\n\n\n\n

As\nwe set out in our analysis<\/a>\nof the Welsh Government\u2019s 1st<\/sup> Supplementary Budget for 2020-21, the\noutlook for the Welsh budget in 2020-21 had changed substantially since Final\nBudget plans were made in March. Additional revenue consequentials included in\nthe supplementary budget included \u00a31,856 million from Covid-19 response funding,\non top of \u00a3123 million from Budget 2020 measures.  <\/p>\n\n\n\n

The\nsupplementary budget only included consequentials confirmed at Main Estimates\nby the UK government. Tracking funding past this point is tricky, given the regular\nfunding announcements being made by UK government departments. Figure 1 summarises\nour attempt at estimating the total Covid-19 consequentials coming to Wales. <\/p>\n\n\n\n

The\n\u201cadditional \u00a3500 million\u201d for Wales quoted by the UK government did not result\nfrom the economic stimulus package, but from confirmation of additional\nspending on public services and business support. The \u00a3500 million also\ncontained totals already announced (such as funding for the cultural sector). <\/p>\n\n\n\n

The\nbulk of the additional funding for Wales appears to come from increased allocations\nto health spending (\u00a3340 million). Though it didn\u2019t get much attention in the speech\nitself, the UK government announced a further \u00a332.9 billion of public services\nfunding (see footnote 6 of table 2 here<\/a>).\nThis included (a rather eye-watering) \u00a315 billion for PPE procurement and \u00a310\nbillion for the government\u2019s Test, Trace, Contain and Enable programme. <\/p>\n\n\n\n

Given the\nscale of these funding commitments, one would have expected to see larger\nBarnett consequentials resulting from them. However, it is noted that certain\nhealth services funding was being provided at a UK-wide basis, and some of the\nfunding may also be coming from within pre-existing budgets. <\/p>\n\n\n\n

Figure 1: Estimated\ntotal consequentials for Welsh Government from Covid-19 funding announcements<\/strong><\/p>\n\n\n\n
\n Source of funding <\/strong>\n <\/td>\n \u00a3 m<\/strong>\n <\/td>\n Notes:<\/strong>\n <\/td><\/tr>
\n Total at Main Estimates for 2020-21<\/strong>\n <\/td> 1,856<\/strong> <\/td> Confirmed in 1st Supp. Budget. For breakdown, see Annex 1 here<\/a>. <\/td><\/tr>
\n  \n <\/td>\n  \n <\/td>\n  \n <\/td><\/tr>
\n Additional announcements:<\/strong>\n <\/td>\n 440 <\/strong>\n <\/td>\n  <\/strong>\n <\/td><\/tr>
\n Emergency Management Agreement for railway services (for year 2019-20)\n <\/td>\n 35\n <\/td>\n Not 2020-21 \n <\/td><\/tr>
\n Additional DEL compensation for existing BR reliefs\n <\/td>\n 5\n <\/td>\n Included in Main Estimates but not in Supplementary Budget\n <\/td><\/tr>
\n Charities (8 April)\n <\/td>\n 20\n <\/td>\n Announcement here<\/a>\n <\/td><\/tr>
\n Charity support – National Lottery Community Fund (8 April)\n <\/td>\n 18\n <\/td>\n Announcement here<\/a>\n <\/td><\/tr>
\n Increased response fund (13 April)\n <\/td>\n 144\n <\/td>\n Announcement here<\/a>\n <\/td><\/tr>
\n Fisheries (17 April)\n <\/td>\n 0.3\n <\/td>\n Announcement here<\/a>\n <\/td><\/tr>
\n Local government funding (18 April)\n <\/td>\n 95\n <\/td>\n Announcement here<\/a>\n <\/td><\/tr>
\n Rugby League (1 May)\n <\/td>\n 1\n <\/td>\n Announcement here<\/a>\n <\/td><\/tr>
\n Care homes in England (15 May)\n <\/td>\n 35\n <\/td>\n Announcement here<\/a>\n <\/td><\/tr>
\n Transport for London (19 May)\n <\/td>\n 65\n <\/td>\n Announcement here<\/a>\n <\/td><\/tr>
\n Test and Trace Service and housing for rough-sleepers in England (26\n May)\n <\/td>\n 23\n <\/td>\n Announcement here<\/a>\n <\/td><\/tr>
\n  \n <\/td>\n  \n <\/td>\n  \n <\/td><\/tr>
\n Consequentials \u2018confirmed\u2019 at Summer Statement:<\/strong>\n <\/td>\n 502<\/strong>\n <\/td>\n  \n <\/td><\/tr>
\n Covid schools catch-up plan (19 June)\n <\/td>\n 50\n <\/td>\n Announcement here<\/a>\n (includes free school meal voucher scheme funding)\n <\/td><\/tr>
\n MHCLG rough sleeping (24 June)\n <\/td>\n               5 \n <\/td>\n Announcement here<\/a>\n <\/td><\/tr>
\n Zoos in England (27 June)\n <\/td>\n 6\n <\/td>\n Announcement here<\/a>\n <\/td><\/tr>
\n New funding package for councils (2 July)\n <\/td>\n 30\n <\/td>\n Announcement here<\/a>\n <\/td><\/tr>
\n Investment to protect cultural, arts and heritage institutions (5\n July)\n <\/td>\n 59\n <\/td>\n Announcement here<\/a>\n <\/td><\/tr>
Traineeships, apprenticeships etc. in England (8 July) <\/td>\n 13\n <\/td>\n Estimated from available information\n <\/td><\/tr>
\n Additional health spending in England (8 July)\n <\/td>\n 340\n <\/td>\n Estimated from available information\n <\/td><\/tr>
\n  \n <\/td>\n  \n <\/td>\n  \n <\/td><\/tr>
\n Total Covid-19 consequentials<\/strong>\n <\/td> 2,799<\/strong> <\/td>\n  <\/strong>\n <\/td><\/tr><\/tbody><\/table>\n\n\n\n

<\/p>\n\n\n\n

Overall, the UK government appears to be correct in asserting that the Welsh Government will receive \u00a32.8 billion from all Covid-19 response funding announced to date. Breaking this down by area: <\/p>\n\n\n\n