3. Statement by the Cabinet Secretary for Finance: The Draft Budget 2019-20

Part of the debate – in the Senedd at 3:20 pm on 2 October 2018.

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Photo of Mr Neil Hamilton Mr Neil Hamilton UKIP 3:20, 2 October 2018

I also think that the Cabinet Secretary has done a good job in coping with the reduction of 1 per cent, the cash reduction, in the RSG to 2019-20, and managing to reduce the gap by £28 million to only £15 million. That remaining £15 million is obviously going to lead to problems to deal with, but, nonetheless, I do think that the Cabinet Secretary's ability to try to square the circle that he's faced with is producing those dividends.

I also approve strongly of some of the other elements that he mentioned in his statement, in particular, the child poverty agenda and the increased number of schoolchildren who qualify for free school meals. And I also support his decision on the early intervention, prevention and support grant to increase the amount paid and also to split it into two, because there has undoubtedly been a great, disconcerting period for those who think, having moved from a kind of hypothecated budget into one where these different grants are lumped together, that some people might lose out and get less than they otherwise would have done. So, I think that is a sensible move to slow down the process of change, and that will be warmly welcomed, I think, throughout Wales.

We can also, of course, welcome the increased spending on health. It's a fact that everybody is aware of that health inflation is higher than inflation nationally, and the needs of the population are going to increase with an increased ageing population and a lower number of people in active work. So, the cost of financing this is going to be an increasing problem in years to come. That's partly, I suppose, the increasing amounts that are available due to the UK Government's decision to increase the amount of money spent on the health service through its seventieth anniversary fund, but I don't think we should shower them with compliments on their achievement, because in the current financial year, the UK Government is only going to increase spending by 3.6 per cent, which is 0.1 per cent less than the average increase in health spending since 1948. So, actually, it's just more of the same and treading water rather than an unexpected bonus on top of everything else. The health Secretary said that the health and social services MEG is now £8.2 billion for 2019-20, so health is becoming an even bigger component of the Welsh Government's budget. The £330 million extra for this financial year is, of course, very welcome—although, as he rightly said, what's given on one hand is partly taken away on the other and about half the budget is already earmarked by the UK Government.

But the real elephant in the room here is not so much the funding available, but the continuing inability of many health boards to be able to manage their own budgets properly, and we've seen, this year, that there's a £360 million rolling deficit, which is up from £253 million in the previous year. Hywel Dda and Betsi Cadwaladr, in particular, are actually not improving to the extent that we would expect. The sums of money involved here, of course, are huge: Hywel Dda, £70 million to the beginning of April this year in deficit, and Betsi Cadwaladr up from £30 million to £36 million. So, against this background, the Cabinet Secretary has an unenviable task, I think, in trying to balance the books.

The environment budget this year hasn't suffered the cuts that it did last year. That's to be welcomed. Although, of the £34 million increase, £17 million, a half of it, is going to be spent on various waste projects, which would not be a priority of mine, because—and this is nothing to do with the issue of global warming in itself—I simply can't see the point of spending £17 million on sorting waste and being able to take out the plastic in Costa Coffee cups, for example, when the UK accounts for only about 2 per cent of carbon dioxide emissions, even if we accept the link between carbon dioxide emissions and global warming. Twenty-five per cent of all the plastic waste that is collected in the EU is exported to the far east and other places where their control measures are far inferior to what we have in this country and, indeed, in Europe generally. So, what we're actually doing is making the problem worse by collecting all this material and then exporting it to countries that throw it into rivers and landfill elsewhere. So, we're not actually contributing to the solution of the problem, even if you accept that there is a problem in the first place. So, that would certainly not be a priority of mine.

But the background mantra, of course, as always, is austerity. But, I think we should remind ourselves that this period of austerity—to which the Cabinet Secretary's statement itself actually gives the lie, because he refers to the inability of the Chancellor to meet his targets of deficit reduction on a serial basis. In 2007-08, the national debt stood at about £780 billion. This morning, at 10.15 a.m., I looked at the national debt clock, and it was £2 trillion or more. So, you can hardly describe this as a period of austerity when the Government has been running record deficits. I'm afraid it's a reality of life that if you don't live within your means, then suddenly the money runs out, and that's the problem with socialist Governments always, of course—that they run out of other people's money to spend.

The Labour Party under its current leadership has been a great admirer of President Chávez and President Maduro in Venezuela. Well, Venezuela this year has 1 million per cent inflation and they're now, instead of exporting oil, exporting people. So, the idea that you can carry on spending as though there's no tomorrow, forever and a day, is, of course, against the laws of nature and reality. Were we not constrained in the way that we are financially in Wales, as if John McDonnell, perish the thought, were ever to become the Chancellor of the Exchequer in the United Kingdom, he really would be able to follow the example of Venezuela, and then I think the Welsh Government would be in a pickle indeed. Then they would discover what the true meaning of austerity is.

At the end of the day, over a period of time, you have to balance the books and, in an inadequate way and a limited way, that's what the Conservative Government has been trying to do. If the Government had borrowed even more money, then the debt burden and its financing burden would have been even greater. This year, over £50 billion is going to be spent on debt interest, and even though the Bank of England has bought up a significant part of Government debt—therefore, in a sense, it's paying money to itself—we're still talking about £4-odd billion that could be spent on front-line services that is going in debt interests to third parties. So, eventually, as I say, you run out of money.

And, in due course, the Welsh Government will have the freedom and the discretion to use the devolved tax powers that it has. I hope it will use those not simply to push up the tax burden, but actually to try to transform the Welsh economy into an enterprise economy by reducing taxes and hence encouraging investment, encouraging enterprise, encouraging people to come and live in and work in Wales so that—what we all know we need to do—we can raise the tax base by raising the amount of wealth that is created in the Welsh economy in general. So, it's a choice that we will have to make in due course. It's been postponed now until the next Assembly. But, like Nick Ramsay, I hope that the Welsh Government, if it is going to prepare for being in Government in a few years' time, will actually change its approach to an enterprise economy and realise, at the end of the day, the wealth that is created is created by the people, not by Government. Governments spend money, but they can't spend it if it's not created.