Page last updated at 16:54 GMT, Wednesday, 22 April 2009 17:54 UK

Wales faces 416m funding squeeze

Alistair Darling in Downing Street
Opposition parties have warned Mr Darling's funding plans will hit services in Wales

The Welsh Assembly Government admits it faces a "significant challenge" of a £416m funding squeeze as a result of Chancellor Alistair Darling's Budget.

Opposition parties have called it "a huge blow" and warned of the impact on services such as health and education.

Revenue spending is down £216m for 2010/11 and as expected capital spending will be down £200m.

An assembly government spokesman said Wales had to "play its part" in balancing the books.

First Minister Rhodri Morgan said cuts could not be ruled out but he said significant savings had been managed in the past.

Ministers in Cardiff Bay have been warning that the economic downturn, and its severe effect on the public finances, would have a knock on effect on the assembly government's budget next year.

We will continue to drive efficiencies, focus on outcomes and ensure that we stretch the Welsh pound to deliver the maximum benefits
Welsh Assembly Government

Their worst case scenario was a £500m drop in the money they were expecting - and the announcement was not far off that.

'No guarantees'

First Minister Rhodri Morgan has told BBC Wales that he cannot guarantee that there will not be cuts to services and job losses in the public sector as a result of the announcement.

But he stressed that the assembly government has shown itself to have been able to make significant efficiency savings in the past.

The opposition parties say there will have to be cuts and are warning that future years could be even worse.

Shadow Welsh Secretary Cheryl Gillan said the budget was "was all about playing politics and not about saving jobs".

BBC Wales' political editor Betsan Powys on what the budget means for Wales

"With the unemployment rate higher in Wales than any other UK nation this budget should have been about supporting businesses, workers and families," she said.

"Instead, every man, woman and child in Wales will be paying for Labour's economic incompetence for years to come."

She added: "Today's Budget demands a rethink in assembly government spending, addressing the concerns of public services, businesses, and the people of Wales, and a shift away from expensive gimmicks and giveaways."

The Liberal Democrat spokesman for Wales in the Commons, Roger Williams MP branded Mr Darling's Budget statement as a "stark assessment of Labour's economic mismanagement".

Mr Williams said: ""The Welsh Assembly Government will have to make huge cuts to their budget because Labour in Westminster have failed to keep a lid on exuberant credit and banking excesses.

'Mistakes'

"Wales is underfunded and it's hard to see how these cuts can be applied in a way that doesn't affect frontline services."

Plaid Cymru said it confirmed their worst fears of the effect of a "billion pound cut" upon Wales by 2013/14.

"The consequences of this upon the Welsh economy are frightening and are directly attributable to Labour's mismanagement of the UK economy," said Adam Price, MP, Plaid's spokesman on treasury affairs.

A Welsh Assembly Government spokesman said the budget reductions faced in Wales posed a "significant challenge" as it looked to make services as efficient as possible.

He said the £60m of new money over the next two years would "partially alleviate" the effect.

"There is a modicum of comfort for Wales that the representations we have made to UK government ministers, have avoided potentially unfair and disproportionate larger revenue cuts of almost £300m for 2010/11.

'Balance the books'

But the spokesman added: "Wales will inevitably be called upon to play its part in helping to balance the books in years to come - we cannot be immune from the UK spending squeeze to get the national debt back down to sustainable levels.

"We are already committed to driving efficiencies across public services in Wales, and are recognised by the UK Government and other devolved administrations as being ahead of the game in this respect."

The spokesman welcomed measures to benefit business, the young unemployed, the car scrappage scheme and support for new technology sectors.

"The tightening budgets we face emphasise the importance of using our resources effectively and efficiently. We will continue to drive efficiencies, focus on outcomes and ensure that we stretch the Welsh pound to deliver the maximum benefits for people across Wales."

David Rosser, CBI Wales director said the shortfall in spending "needs to concentrate minds in the assembly government".

He added: "Front line cuts in services may not be necessary if the assembly government now redoubles its efforts to work with the private sector to deliver innovative solutions that combine the best that the public, private and third sectors have to offer."

Mr Rosser said the £750m investment fund announced for emerging technologies and the £450m for low-carbon manufacturing "must be replicated" in Wales.

The Treasury said a million basic rate tax payers in Wales will be £145 better off after Alistair Darling's announcement.

A spokesman said the 5% increase in the basic rate state pension, along with £60 payment made at the beginning of the year, mean that Wales' 0.6m pensioner households will be better off.

He also said that more than 4,540 businesses in Wales had benefited from being able to spread payments of tax.



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