Barnett Squeeze drives £300
million hole in Welsh Budget
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Embargo: 1.00am Wednesday 7 January 2004
A £300 million hole in the Welsh budget is being caused by the
operation of the Barnett Formula which distributes Treasury funding
across the nations of the United Kingdom. The IWA’s latest devolution
quarterly report monitoring the operation of the National Assembly,
between September and December 2003, reveals that the budget gap has
resulted from increases in health spending. Historically Wales has
always spent more per head on health, reflecting greater need. However,
this is not taken into account by the Barnett Formula which is calculated
on the basis of extra allocations to England. The result is what has
become known as the “Barnett Squeeze” on Welsh spending.
The UK government’s increased allocation to health spending,
resulting in increases for the Welsh health spending under Barnett
rules, is bringing enormous pressure on the Assembly Government’s
overall budget. This is because for, inherited reasons of greater
relative ill-health, every £100 spending increase on health
in England requires a £114 increase in Wales, with the extra
£14 having to be found from within the overall Welsh block.
Hence the more health spending rises, the greater the pressure on
funding elsewhere within the block.
Health Budgets in England and Wales 2003-2004 and 2004-2005 (£’000’s)
| |
2003-2004 |
2004-2005 |
| Health Budget in England |
55,752,000 |
67,444,000 |
| Barnett Allocation to Welsh Health Spending(5.89% of English
allocation) |
3,283,793 |
3,972,452 |
| Total Health allocation in Welsh Budget |
3,580,234 |
4,308,148 |
| Difference between Barnett and Budget allocation |
296,441 |
335,696 |
This Table, published in the IWA’s report, shows the budget
for health in England for 2003-2004 and 2004-2005. The Barnett Formula
then determines the allocation to Wales, currently 5.89% of this.
In both budgets the Assembly Government has allocated more to health
than this amount, resulting in the Barnett squeeze. As the IWA report
states:
“The additional finances needed for health, and therefore
the burden on other expenditure groups, is increasing to drive
a widening hole through the Assembly Government’s overall
budget. Although an extra £335 million may not seem a large
amount when compared with the total Welsh block of nearly £12
billion in 2004-05, it will have a significant impact at the margins
of the discretionary expenditure options available to the Assembly
Government.”
MORE INFORMATION
Contact: John Osmond, IWA Director, 029 2057 3944 or johnosmond@iwa.org.uk
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