The Welsh Government published its Second Supplementary Budget for 2023-24 on 20 February. This Second Supplementary Budget outlines the changes since the First Supplementary Budget (June 2023) and includes changes highlighted in the Welsh Government’s Update on 2023-24 Financial Position last October.
These ‘Supplementary Budgets’ are ‘additional’ in-year budget announcements. They set out changes to Welsh Government's planned expenditure which requires the Senedd's approval.
Why was a financial update published last autumn?
At the time, we set out the detail in our article: Balancing the books: an update on the Welsh Government’s 2023-24 Financial Position
In December 2022 the Welsh Government’s Draft Budget narrative 2023-24 stated that as inflation was significantly higher than forecast, the settlement it received from the UK Government could be worth “£1bn less in 2023-24 alone” in real terms compared to the time it was set in the Spending Review 2021.
The UK Government’s Spring Budget in March 2023 led the Minister for Finance and Local Government to describe the 2023-24 Wales settlement as “still up to £900m lower in real terms than expected at the time of the 2021 spending review”.
In a statement last summer the First Minister confirmed the Cabinet would be working over the summer to mitigate budgetary pressures – ultimately leading to the publication of the Financial Update in October 2023.
At the time of the October publication, only headline changes were outlined, so this Second Supplementary Budget is the first opportunity for Members to look into the details.
What are the key changes since the First Supplementary Budget?
This Second Supplementary Budget shows an increase in revenue plus capital of 1.2% from £23.6 billion to £23.8 billion (Figure 1).
Figure 1: Funding changes since First Supplementary Budget 2023-24
The main changes to the funding available include a total net increase in the Welsh Government’s budget of £664.1 million.
This includes an increase of £490.3 million from the UK Government, within which £363.6 million of Barnett consequentials are included.
An additional net increase of £173.8 million comes from the Welsh Government’s own funds, which includes:
- £199.1 million drawn down from the Wales Reserve;
- Switch from general capital of £18.6 million;
- A decrease of £43.9 million, due to carry forward of funding into 2024-25 outside of the Wales Reserve.
No changes were announced regarding devolved tax income or principal borrowing repayments.
Most Welsh Government departments will see a decrease in in-year funding
Most departments see a decrease in funding compared to the First Supplementary Budget, the largest of which is for Education and the Welsh Language (a decrease of £340 million or 12.7% compared to the First Supplementary Budget).
Health and Social Services sees the largest increase of £667 million or 6.1% compared to the First Supplementary Budget, £425 million of which was previously included in the Financial Update 2023 in October.
The changes in allocations for each department (or Main Expenditure Group – MEG) are summarised in Figure 2.
Figure 2: . Changes between the Departmental Expenditure Limits in the Second Supplementary Budget 2023-24, from the First Supplementary Budget 2023-24
* Excludes around £0.9 billion non-domestic rates income.
** Includes allocation of £226 million of non-fiscal revenue due to student loans.
Figures are rounded. Refer to the Welsh Government Second Supplementary Budget 2023-24 for exact figures.
The Second Supplementary Budget includes an additional £59 million to reflect the forecast deficit of the Health and Social Services MEG (Main Expenditure Group or ‘department’). The Welsh Government says:
Current forecasts from NHS bodies indicate that although there are significant improvements with four of the seven Local Health Boards forecasting to hit their target deficits, the others will fall short of the targets set in November….This allocation is made on a one-off basis and will be held within the MEG rather than allocated to organisations not meeting target deficits.
Several spending areas within Health and Social Services have had funding reprioritised to contribute to in-year savings, including £26.8 million from Supporting Children and £16.2 million from Support Mental Health Policies and Legislation.
Responding to concerns from the Finance Committee to the reduction to the Mental Health budget line, the Minister for Finance and Local Government said:
[…] as I understand it, it hasn’t resulted in cuts to front-line services, because that money had been allocated to the budget line, but hadn’t yet been identified for particular projects, which is why it was available for reprioritisation.
There will also be an increase of £96 million (2.9%) for the Climate Change MEG, in addition to the additional £125 million provided to Transport for Wales as part of the Financial Update in October 2023, which the Minister said at the time “would meet the pressure”.
The only other department to see an increase is Social Justice, which will see an increase of £1 million (0.9%) compared to the First Supplementary Budget.
The ‘last’ Welsh budget for 2023-24
Members are due to debate the Second Supplementary Budget for 2023-24 on 13 March. It will be an opportunity for Members to scrutinise the Welsh Government and give their opinions on how well funding has been prioritised; this is set to be the last time a budget is published for 2023-24.
You can tune in and watch on Senedd tv, check the transcript afterwards and follow Senedd Research on ‘X’ (formerly Twitter) for the latest articles exploring the budget process and more.
Article by Božo Lugonja and Joe Wilkes, Senedd Research, Welsh Parliament
