Why is Wales Skint? Welsh Labour or Westminster?

January 2, 2024January 2, 20244 months ago 9 min read

In December, the 24/25 draft budget for Wales was released – and it was fairly worrying. The short of it is that Wales is skint – we are likely to see less public services and pay more in (council) tax, but why and who is to blame?

I spoke to a few politicians from different ends of the political spectrum to try and find out.

The wider problem

We have all seen household bills soar over recent years as inflation has rocketed. Rising prices in gas, electric and food has left many really feeling the pinch. But as tough as it has been for us, rising inflation has led to a record increase in wages – which generally (but certainly not for everyone) has meant that although things cost more -we have more (even if it doesn’t add up to the same amount).

For Governments, they tend to be seeing costs go up, but without the ability to increase their income. In real-term funding, Wales has £1.3 billion less than it did three years ago. Inflation has hit most of the Western world in recent years, but it appears that Wales is going to be hit worst than most. Why?

The blame game – Conservatives View….

Unsurprisingly, AM Tom Giffard (Conservative) feels that the blame lays firmly within Wales and particularly the Labour party running the finances –

“We often hear the Welsh Government saying it doesn’t have enough money to fund all the projects that it wants, but it’s worth remembering that it receives £1.20 in funding for every £1 spent in England.”

“But what we don’t talk enough about in Wales is the steps the Welsh Labour Government takes to grow our own economy in Wales.”

“Every Government in the world looks to increase the funding available to it by growing the economy. Economic development is devolved, that’s why we have our own economy minister. But the Labour Party doesn’t seem interested in actually growing the economy.”

“Take the 20mph scheme for example, we know that from the Government’s own estimates that will hit the economy by up to £9bn.”

“Or the cancellation of the M4 relief road. Or the proposed tax on the tourism industry. Or their latest budget that increased business rates and cut apprenticeships.”

“All these things make it more difficult for businesses to grow, and in turn, have a detrimental impact on our economy. Which explains why we have less money to spend on public services.”

“So instead of complaining that it doesn’t get enough money from the other end of the M4, I’d like to see the Welsh Labour Government take some responsibility for growing the economy to fund public services.”

Labours position – Rob Stewart

As you would expect, The Labour Party see things differently, and they will intend to hit the political tennis ball of blame back towards the Torys at Westminster.

The (Labour) leader for Swansea Council, Rob Stewart tole me :-

“The main reasons for big budget pressure in Wales is that many of the decisions taken by the Government in England, were taken in a way which did not trigger the Barnet formula meaning the usual equivalent share of money for Wales did not come to Wales.”

“This meant Wales only received a £305m increase to cover a two-year period. For comparison Swansea Council spends more than £200m on education alone. So £305m is well below what should have been provided. The inflation, pay and energy pressures mean that services like health and education need much more money just to stand still.”

“Councils needed around £500m to cover most of the pay and inflation pressures – they got just £169m extra. We also have not had a penny in ‘fair share’ money for HS2 as the UK Government decided to class it as an England and Wales project – despite none of it being in Wales. This meant no money came to Wales – we believe Wales missed out on well over a billion pounds in funding as a result”.

The general line from the Labour Party in Wales is that ‘things will get better should a Labour government be elected in Westminster’.

What do Plaid Cymru say?

Plaid Cymru Assembly Member Sioned Williams unsurprisingly goes further than Rob Stewart when pointing the blame to Westminster:-

“Wales is skint because we are part of an unequal union that doesn’t ensure fair funding for Wales.”

“Frontline services have reached breaking point. Living standards have plummeted. And Wales is over a billion pounds worse off in real spending power. This is a direct result of the Tories trashing the economy and leaving us to pay the bill.”

“The economic challenges facing our communities is made so much harder by the fact that the current funding deal Wales gets from London is unfair and makes it harder for us to protect and invest in our public services. The Westminster Government– whether Labour or Tory, Sunak or Starmer – must commit to giving Wales a fairer funding settlement based on need and compensate for lost funding – including the £2bn Wales is still owed from HS2.”

“And Plaid Cymru would also look to make the necessary changes to the way Labour in Wales have managed Welsh taxpayers’ money over the years. Their failure to get to grips with running the NHS or Transport for Wales means the little spending power we have is spent on plugging holes rather than fixing problems.”

Welsh Labours dilemma

I think that we are quite likely to see quite an entertaining ‘blame game’ in the coming weeks and months with some Labour squirms in the centre of it. Generally, it is all just part and parcel of everyday politics but with a Labour leadership race in Wales and a General election in Westminster on the horizon, it could all become almost comical.

The front runner to be First Minister in Wales is Vaughan Gething, (now Minster for the Economy) and best known for being the Minister for Health during Covid. Both he, and Jeremy Miles (Minister for Education) face questions over failing departments.

Education in Wales is the worst in the United Kingdom and the stats for the Welsh NHS show no better. Labour have been in power since devolution began, so the question both leadership hopefuls inevitably face is ‘why are we performing worse than the rest of the Union’?

And this will inevitably bring the same answers as we have already heard. The Torys will blame ‘Welsh Labour’, Plaid will blame ‘Westminster’ and Labour will agree with Plaid but attempt to limit that ‘blame’ to the Torys in Westminster (and not Westminster as a whole).

We saw this recently when Mark Drakeford blamed the growing child poverty rates in Wales on the “Tory government in Westminster”. Sighting that child poverty had declined in the first half of devolution under the UK Labour party but had suffered since.

He also noted that the people of Wales are naturally more to the left than in the UK as a whole and that Keir Starmer is therefore right to position himself more to the centre (to attract voters of Middle England).

The Labour tight rope

In the next 2 months, Welsh Labour will attempt to tread an unbelievably thin tight rope – one which if achieved, could be their greatest ever achievement, but any slip could result in them costing Labour a Westminster election win, or a loss of power here in Wales, or even a genuine path to Welsh independence.

The aim is the status quo – the party maintaining its dominance in Wales while remaining completely dedicated to the United Kingdom and riding high in the polls on a UK level.

But the main issue it is facing is that (as we have already seen) the status quo is NOT working for Wales. We are skint, and although everyone disagrees on exactly why, the consensus is that we are either skint because Labour is useless in Cardiff or because Westminster doesn’t work for Wales.

So, ‘why is Wales skint?’

The reality is that this is such a complex question that requires economists, historians and has no defined answer at the end of it. However, every one of us will need to ask ourselves that very question soon enough.

Wales will be the political football of 2024. Our failures will be the ‘pin-up poster’ for the Tory party as they attempt to convince voters not to support Labour.

Why has Wales got the worst NHS in the UK?

Why has Wales got the worst schools in the UK?

Why has child poverty in Wales gone up?

and Why is Wales skint?