by franklittle on 26 October, 2011
Finance director Derek Davies presented an overview of the Welsh Government’s proposed support for local government in 2012/13. While not as rushed a job as last year, when councils were left in the dark by Cardiff for far too long, there are still one or two grey areas, particularly in relation to specific grants and to the possibility of an equalisation pool. There is also the theoretical possibility that the Senedd could drastically re-jig the budget, but it is much more likely that there will be a few cosmetic touches not affecting the local government settlement. (That’s my guess, not Mr Davies’s.)
The 2012/13 settlement would be in line with what the council was told last year, and the 2013/14 indicated settlement of 1.3% is no surprise, but the indicated increase of a mere 0.6% in 2014/15 is less than expected. It was going to be tough enough anyway, what with inflation running at 5-6%. The Governor of the Bank of England predicts that it will fall to 1.8% in 2013 as exceptional price rises fall out of the system. However, Mr King has been wrong before and his latest tranche of quantitative easing (QE) (also characterised as stuffing the bankers’ mouths with silver in the hope that some will pass through to entrepreneurs) may well give a further boost to inflation. It has to be said that QE is endorsed not only by George Osborne and Vince Cable but also by Labour’s Ed Balls and Alistair Darling. I feel rather uncomfortable siding with John Redwood in querying QE, though a more sympathetic commentator, Paul Lewis of BBC’s “Money Box”, also criticises the policy, pointing out that QE depresses bond yields and thus reduces returns on pension investments. But I have digressed.
Various Labour members of the council took the opportunity of the settlement statement to make party political speeches, generally putting all the blame on the coalition government in Westminster. “Cutting too far, too fast” was the familiar war-cry. What they failed to acknowledge was that if Labour had returned to power in 2010, not only would the cuts have been within 10% of those of the coalition, but that the Wales revenue settlement would have been less than that actually obtained by Cheryl Gillan. Somehow George Osborne’s VAT increase by five percentage points is disastrous, but the four percentage point rise which we now know was Alistair Darling’s intention no doubt would be hailed by these people as responsible.
The Labour-led Welsh Government was able to make choices, to assign priorities. For instance, it could have chosen to make education a priority, and close the funding gap with England. It did choose to subsidise a multi-million pound north-south air link, a pointless reorganisation of the National Health Service in Wales and to spend money on a number of consultants’ reports, most of which it ignored.Leave a comment