WIREDGOV

Our Budget next year will be almost £900m less than this year and comes on top of the savage Budget in June, representing the deepest public spending cuts since World War 2.

The Cabinet is meeting early tomorrow morning to discuss the impact of the settlement.

The Assembly Government has always said that it will play its role in reducing the UK budget deficit.  But the cuts announced today are too fast and too deep.  They will endanger the fragile economic recovery and threaten devastating and long term consequences for the most vulnerable people in our society. They will undoubtedly hit Wales harder than other parts of the UK because we are already underfunded, as recently demonstrated by the independent Holtham Commission.

The reductions for the Assembly Government’s Budget fully vindicate the prudent approach to planning assumptions we have adopted since the Spring. Although the cuts are towards the lower end of the possible outcomes for revenue expenditure, the capital cuts are as grim as predicted. Cabinet now has the opportunity to consider the implications for our Budget, which will be laid on 17 November.

In real terms, our total Budget is set to fall by around 3.1% per year on average, or 12% in total over the coming four years. This means that our Budget in 2014/15 will be £1.8bn lower in real terms than it is this year. Overall, in cash terms the reductions to our Budget will be 3% over the period.

Our capital Budget has been hit particularly hard, and will be cut by 40% in real terms – 34% in cash terms – over the next four years. This substantial reduction, particularly next year, where the cut is more than 25% in real terms, will clearly have a major impact on the private as well as the public sectors.

These cuts come on top of yesterday's decision to cancel the Defence Technical College project at St Athan, no clarity over the decision to proceed with the electrification of the Swansea to London railway, the proposed closure of the passport office in Newport and the unprecedented £18bn cuts in welfare payments that will affect the most vulnerable people in our society.

Against this background, we will continue to take a distinctive Welsh approach to safeguard essential services in Wales. We have a duty to promote fairness and equality in the way we allocate resources which will be best for the economy, as well as the social fabric of Wales. That is why we are committed to protecting investment in schools, skills and healthcare, and committed to maintaining universal entitlements – including the successful concessionary fares scheme, free prescriptions, free swimming and free breakfasts & milk for primary school children.

The degree of protection for these areas will now be determined as we continue to develop our Draft Budget, which will be laid before the National Assembly on 17 November.

The scale and speed of these cuts make it all the more important that we continue to drive efficiency and innovation. For the past year we have been developing a pan-public sector response to the challenge of falling budgets.  This is essential if we are to avoid resorting to 'salami-slicing' cuts in services and cuts in front-line jobs, with those in greatest need often taking the biggest hit. That is unacceptable to the Assembly Government, which is committed to doing everything it can to narrow the equality gap, not widen it.  

The outcome of the UK Government's Spending Review also confirms the need for a fairer system of funding for Wales. We look forward to the UK Government’s consideration with the Assembly Government of the compelling recommendations contained in the Final Report of the Holtham Commission, as we continue to be underfunded – to the tune of more than £1bn over the next four years.