Barnett Squeeze drives £300 million hole in Welsh Budget
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