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Just before Christmas, the Welsh Government revealed the draft budget for 2021-22 (pdf), published in the context of the Covid-19 pandemic.
Spending & Borrowing Plans
The Welsh Government has seen a massive increase in its budget, largely a result of changes to UK wide spending and borrowing to deal with the pandemic. Usually, the total amount of money managed by the Welsh Government in a given financial year (set by the UK Treasury) is around £17-19billion. The total amount of money being spent by the Welsh Government during 2021-22 will be around £22.3billion once additional spending outside the usual budget (Annually Managed Expenditure) is included.
Every government department has seen an increase to their day-to-day/revenue budget, but there have been cuts to the housing & local government and wellbeing and Welsh language capital budgets – the latter amounting to a 15% cut (though it’s the smallest departmental allocation overall).
The Welsh Government intends to make full use of their annual capital borrowing limit (£150million) and also intends to draw down £125million from reserves. Interest repayments will amount to £7million in 2021-22.
The Welsh Government say they’ll continue to press the UK Government for the annual borrowing limit to be increased.
Budget Winners & Losers
It’s so obvious it’s barely worth mentioning, but health is the main winner yet again. An extra £361million has been allocated to the delivery of core NHS services. Public Health Wales will receive an extra £10million.
Although most health allocations remain unchanged from 2020-21’s plans, there’s a surprise £1.2million cut to health promotion and targeted immunisation programmes.
The other big winner is local government and housing (there’ll be a post on the draft local government settlement shortly). An extra £224million has been provided for day-to-day council spending as well as an additional £40million for the housing support grant and £4million to deal with homelessness.
Local government and housing capital spending is largely unchanged, but more money has been moved towards building safety and Help to Buy while the social housing grant has been cut by £24million compared to the original 2020-21 plans.
Bus support grant funding has been increased by £18.6million. There’s an extra £12.5million towards programmes to future-proof the economy and £30million for active travel.
Education revenue spending is set to increase by £57million, with a £40million boost for further education colleges – largely at the expense of student support grants.
Despite a big cut to capital funding, mental health receives a £9.5million funding boost. Cultural organisations and sport receive a combined additional £7.3million in capital spending. Underlining just how much priorities have changed, there’s only an additional £1.6million for climate change action, with a £3.6million funding boost for biodiversity measures.
There are modest changes to the central administration budget, with an extra £1.6million revenue funding provided for domestic abuse services. The Welsh Government’s staffing and administration budgets have been effectively frozen.
Tax Proposals
The Welsh Government expects to raise just under £3.5billion from devolved taxes, council tax and non-domestic rates in 2021-22.
There are no plans to change the Welsh rate of income tax.
The only major changes concern land transaction tax. The threshold upon which you pay land transaction tax is set to be cut to £180,000 (from £250,000). A 3.5% rate will apply for purchases between £180-250,000. All other rates remain unchanged.
Some changes came into effect on 20th December 2020.
The higher residential rate will be charged if the purchase is a second home – though this won’t apply if the purchase will be the main home.
Companies and trusts buying residential properties will need to pay this higher rate too. There are other terms and conditions for the higher rate – more here.
Landfill disposal tax rates is set to increase in line with rates in England.
