Plaid Cymru Fiscal Implications of Party Manifestos

Digwyddiad Briffio Etholiadau’r Senedd 2021 Senedd Election Briefing 2021 27/04/2021

DR RACHEL MINTO, GUTO IFAN & CIAN SIÔN Canolfan Llywodraethiant Cymru, Prifysgol Caerdydd Wales Governance Centre, Cardiff University

DAVID PHILLIPS Sefydliad Astudiaethau Cyllidol Institute for Fiscal Studies #Senedd21 Y rhagolwg ar gyfer cyllideb Cymru The outlook for the Welsh budget

• Y cyd-destun cyllidol ers 2010 The fiscal context since 2010

• Y rhagolwg ar gyfer cyllideb Cymru i 2025−26 Outlook for the Welsh budget to 2025−26

• Pwysau gwariant i 2025−26 Spending pressures to 2025−26

• Newid i gynlluniau gwariant Llywodraeth y DG A change to UK government spending plans Real terms change in Welsh Government day-to-day (resource) funding, 2010-11 to 2021-22 (2010-11 = 100)

125 • Ac eithrio cyllid COVID-19, mae cyllideb Cymru bellach 120 wedi ad-ennill ei lefel 115 Day-to-day spending incl. COVID-19 funding 2010−11 mewn termau real. 110

105 • Excluding COVID-19 funding, Core day-to-day 100 11 11 = 100 spending the Welsh budget has now - 95 recovered its 2010−11 level 2010 in real terms. 90

Source: WFA analysis of HM Treasury (2020 and previous) PESA; Welsh Government (2021) budget documents. A fall in public sector output during 2020-21 temporarily raised forecast GDP deflator, which drives the real terms fall in ‘core’ resource funding in 2020-21. Real terms change in Welsh Government day-to-day (resource) funding, 2010-11 to 2021-22 (2010-11 = 100)

125 • Ond ar ôl ystyried y twf yn y boblogaeth, mae cyllideb 120 Cymru yn parhau 4% yn llai 115 Day-to-day spending incl. COVID-19 funding nag yn 2010−11. 110

105 • But having adjusted for Core day-to-day 100 11 11 = 100 spending population growth, the - Core day-to-day 95 Welsh budget remains 4% 2010 spending per person smaller than in 2010−11. 90

Source: WFA analysis of HM Treasury (2020 and previous) PESA; Welsh Government (2021) budget documents. A fall in public sector output during 2020-21 temporarily raised forecast GDP deflator, which drives the real terms fall in ‘core’ resource funding in 2020-21. Covid-19 related resource funding for the Welsh Government, 2020-21 and 2021-22

6,000 • Derbyniodd Llywodraeth Carried forward to Cymru £5.7 biliwn mewn 2021-22, £498m cyllid dydd-i-ddydd er 5,000 mwyn ymateb i COVID-19 yn 2020−21, ac mae £500m o’r 4,000

cyfanswm wedi’i gario i’r Covid-19 funding

flwyddyn ariannol nesaf. 3,000 guarantee, £5,200m £ million £

• The Welsh Government 2,000 received £5.7 billion of COVID-19 resource funding 1,000 in 2020−21, of which, £500m has been carried forward Carried forward to 2021-22, £498m 0 into the next financial year. 2020-21 2021-22

Source: WFA analysis of Welsh Government (2020 and 2021) budget documents. Covid-19 related resource funding for the Welsh Government, 2020-21 and 2021-22

6,000 • Yn sgil cyhoeddiadau mwy Carried forward to diweddar, mae gan 2021-22, £498m Lywodraeth Cymru £2.5 5,000 biliwn mewn cyllid dydd-i- ddydd er mwyn ymateb i 4,000

COVID-19 yn 2021−22. Covid-19 funding 3,000 guarantee, £5,200m Consequentials from later • Subsequent announcements million £ announcements, £490m bring total COVID-19 2,000 March 2021 Budget, resource funding available £735m for the Welsh Government in 1,000 2020 Spending 2021−22 to £2.5 billion. Review, £766m Carried forward to 2021-22, £498m 0 2020-21 2021-22

Source: WFA analysis of Welsh Government (2020 and 2021) budget documents. Y rhagolwg ar gyfer cyllideb Cymru The outlook for the Welsh budget

• Y cyd-destun cyllidol ers 2010 The fiscal context since 2010

• Y rhagolwg ar gyfer cyllideb Cymru i 2025−26 Outlook for the Welsh budget to 2025−26

• Pwysau gwariant i 2025−26 Spending pressures to 2025−26

• Newid i gynlluniau gwariant Llywodraeth y DG A change to UK government spending plans Projected funding for Welsh Government day-to-day spending, 2019-20 to 2025-26 (cash terms)

22,000 • Mewn termau nominal, mae

cyllid craidd (ac eithrio 21,000 cyllid COVID-19) yn debyg o With Covid-19 funding gynyddu o £17.1 biliwn yn 20,000 2021−22 i £19.3 biliwn erbyn Core day-to-day spending (baseline 2025−26. 19,000 scenario)

• In cash terms, core funding 18,000 (excluding COVID-19

funding) is set to increase million £ (nominal prices) 17,000 from £17.1 billion in 2021−22 to £19.3 billion by 2025−26. 16,000

15,000 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26

Source: WFA analysis of Welsh Government (2021) budget documents; HM Treasury (2021) Budget 2021; OBR (March 2021) Economic & Fiscal Outlook. Projected funding for Welsh Government day-to-day spending, 2019-20 to 2025-26 (2020-21 prices)

22,000 • Disgwylir i gyllideb Cymru dyfu o 1.6% y flwyddyn ar 21,000 With COVID-19 gyfartaledd mewn termau funding 20,000 real rhwng 2019−20 a

2025−26. 19,000 Day-to day

21 21 prices) spending - 18,000 (baseline • The Welsh Budget is scenario) projected to grow by 1.6% a 17,000 year on average in real £ million million £ (2020 16,000 terms between 2019−20 and 2025−26. 15,000 4th Assembly 5th Assembly 6th Parliament 14,000

Source: WFA analysis of Welsh Government (2021) budget documents; HM Treasury (2021) Budget 2021; HM Treasury (2020 and previous) PESA; OBR (March 2021) Economic & Fiscal Outlook. A fall in public sector output during 2020-21 temporarily raised forecast GDP deflator, which drives the real terms fall in ‘core’ resource funding in 2020-21. Penderfyniadau gwario Llywodraeth Cymru Welsh Government spending decisions

Gadewch i ni dybio fod… Let us assume that…

• Llywodraeth Cymru yn defnyddio’r holl • Welsh Government uses projected arian canlyniadol a dderbynir yn sgil consequentials from NHS and Schools gwariant ar y GIG ac ysgolion yn Lloegr spending in England to fund equivalent er mwyn ariannu gwasanaethau services in Wales. cyfatebol yng Nghymru.

• Gwariant dydd-i-ddydd ar bob maes • All other day-to-day spending grows in arall yn tyfu yn unllin â gweddill y line with the rest of the budget. gyllideb. Real terms change in Welsh Government spending by service area (baseline scenario)

• Yn y senario hon, byddai 12% pob maes gwario yn gweld Real terms change from 2021-22 to 2025-26 10% twf mewn termau real rhwng 2021−22 a 2025−26. 8%

6% • In this scenario, each spending area would see 4%

real terms growth between 2% 2021−22 and 2025−26. 0%

-2%

-4% NHS Total local Local Local Other local Other Welsh government government: government: government Government schools social services spending

Source: Ifan, Guto (2021) Welsh Election 2021: Fiscal outlook and challenges for the next Welsh Government. Cardiff: Wales Fiscal Analysis. Real terms change in Welsh Government spending by service area (baseline scenario)

• Ond mae’r rhagolwg ar gyfer 12% y flwyddyn nesaf yn fwy Real terms change from 2021-22 to 2025-26 10% heriol… Real terms change from 2021-22 to 2022-23 8% • But the outlook for next 6% year is more challenging… 4%

-2%

-4% NHS Total local Local Local Other local Other Welsh government government: government: government Government schools social services spending

Source: Ifan, Guto (2021) Welsh Election 2021: Fiscal outlook and challenges for the next Welsh Government. Cardiff: Wales Fiscal Analysis. Y rhagolwg ar gyfer cyllideb Cymru The outlook for the Welsh budget

• Y cyd-destun cyllidol ers 2010 The fiscal context since 2010

• Y rhagolwg ar gyfer cyllideb Cymru i 2025−26 Outlook for the Welsh budget to 2025−26

• Pwysau gwariant i 2025−26 Spending pressures to 2025−26

• Newid i gynlluniau gwariant Llywodraeth y DG A change to UK government spending plans Total projected NHS funding pressures, 2020−21 to 2025−26

• Bydd arian canlyniadol 2,500 Health-related iechyd yn debygol o fod yn consequentials ddigon i ariannu pwysau gwario craidd y GIG dros y 2,000 pedair blynedd nesaf…

1,500 • Health-related

consequentials will likely be million £ 1,000 sufficient to fund Underlying pressures underlying pressures in the NHS over the next four 500 years…

0 2021-22 2022-23 2023-24 2024-25 2025-26

Source: Ifan, Guto (2021) The NHS and the Welsh Budget: Outlook and challenges for the next Welsh Government. Cardiff: Wales Fiscal Analysis. Total projected NHS funding pressures, 2020−21 to 2025−26

2,500 • ...ond yn debygol o fod yn New mental Health-related health demands annigonol i ariannu pwysau consequentials gwario ôl-COVID ar y GIG. Clearing backlog 2,000 Productivity Direct Covid-19 • …but will likely fall short of costs the amount required to 1,500 meet post-COVID pressures

on the NHS. million £ 1,000 Underlying pressures

500

0 2021-22 2022-23 2023-24 2024-25 2025-26

Source: Ifan, Guto (2021) The NHS and the Welsh Budget: Outlook and challenges for the next Welsh Government. Cardiff: Wales Fiscal Analysis. Components of local government spending pressures from 2019−20

• Bydd angen i wariant awdurdodau lleol gynyddu o 3.4% y flwyddyn (termau nominal) i gwrdd â phwysau gwario dros y blynyddoedd nesaf.

• Local authority spending will need to increase by 3.4% a year (cash terms) to meet spending pressures over the coming years.

Source: Siôn, Cian (2021) Local government and the Welsh Budget: Outlook and challenges for the next Welsh Government. Cardiff: Wales Fiscal Analysis. Estimate of the local authority funding gap (4.5% Council Tax increase & NHS COVID-19 legacy costs are met from Welsh Government budget)

• Heb gyllid ychwanegol i ddelio gyda phwysau ar y GIG, mae awdurdodau lleol yn wynebu bwlch ariannu posibl o £607m y flwyddyn nesaf.

• In the absence of additional funding to deal with NHS cost pressures, local authorities face a potential funding gap of £607m next year.

Source: Siôn, Cian (2021) Local government and the Welsh Budget: Outlook and challenges for the next Welsh Government. Cardiff: Wales Fiscal Analysis. Y rhagolwg ar gyfer cyllideb Cymru The outlook for the Welsh budget

• Y cyd-destun cyllidol ers 2010 The fiscal context since 2010

• Y rhagolwg ar gyfer cyllideb Cymru i 2025−26 Outlook for the Welsh budget to 2025−26

• Pwysau gwariant i 2025−26 Spending pressures to 2025−26

• Newid i gynlluniau gwariant Llywodraeth y DG A change to UK government spending plans Cynlluniau gwario Llywodraeth y DG UK government spending plans

• Hyd yma, rydym wedi derbyn cynlluniau • So far, we have taken the indicative UK gwariant mynegol Llywodraeth y DG a government spending plans set out in osodwyd ym Mawrth 2021 fel ffaith… March 2021 as a given…

• Ond gall y cynlluniau hyn newid ar ôl yr • But these plans could change as a result adolygiad gwariant aml-flwyddyn a of the multi-year spending review ddisgwylir yn yr Hydref. planned to take place this Autumn.

• Mae’r Canghellor wedi ymrwymo i • The Chancellor has committed not to beidio a chynyddu cyfraddau Treth increase Income Tax rates, National Incwm, Yswiriant Gwladol a ThAW. Insurance Contributions or VAT.

• Mae hefyd wedi addo y bydd y gyllideb • He has also pledged to balance the gyfredol yn wastad erbyn 2025−26. current budget by 2025−26. Projected funding for Welsh Government day-to-day spending, 2019-20 to 2025-26 (cash terms)

22,000 • O ddilyn y cynlluniau With Covid-19 funding gwariant a osodwyd cyn y 21,000 pandemig, byddai gwariant

dydd-i-ddydd Llywodraeth 20,000 Cymru oddeutu £600m yn Baseline scenario uwch yn 2022−23 o’i gymharu 19,000 â’r senario craidd. 18,000 • Reverting to pre-pandemic

plans could increase the million £ (nominal prices) 17,000 Welsh Government’s day-to- day spending by 16,000 approximately £600 million in 2022-23 compared to the 15,000 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 baseline scenario. Source: Ifan, Guto (2021) Welsh Election 2021: Fiscal outlook and challenges for the next Welsh Government. Cardiff: Wales Fiscal Analysis. Projected funding for Welsh Government day-to-day spending, 2019-20 to 2025-26 (cash terms)

22,000 • O ddilyn y cynlluniau With Covid-19 funding gwariant a osodwyd cyn y 21,000 pandemig, byddai gwariant

dydd-i-ddydd Llywodraeth 20,000 Pre-pandemic plans scenario Cymru oddeutu £600m yn Baseline scenario uwch yn 2022−23 o’i gymharu 19,000 â’r senario craidd. 18,000 • Reverting to pre-pandemic

plans could increase the million £ (nominal prices) 17,000 Welsh Government’s day-to- day spending by 16,000 approximately £600 million in 2022-23 compared to the 15,000 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 baseline scenario. Source: Ifan, Guto (2021) Welsh Election 2021: Fiscal outlook and challenges for the next Welsh Government. Cardiff: Wales Fiscal Analysis. Real terms change in Welsh Government spending by service area (pre-pandemic plans)

16% • Byddai hyn yn caniatâu i Real terms change from 2021-22 to 2025-26 holl feysydd gwario’r 14% gyllideb dyfu o 1% y 12% flwyddyn mewn termau real rhwng 2021−22 a 2025−26. 10% 8% • This would allow all areas 6% of the budget to grow by at least 1% a year in real terms 4% between 2021−22 and 2%

2025−26. 0%

-2% NHS Total local Local Local Other local Other Welsh government government: government: government Government schools social services spending

16% • Byddai hyn yn caniatâu i Real terms change from 2021-22 to 2025-26 Real terms change from 2021-22 to 2022-23 holl feysydd gwario’r 14% gyllideb dyfu o 1% y 12% flwyddyn mewn termau real rhwng 2021−22 a 2025−26. 10% 8% • This would allow all areas 6% of the budget to grow by at least 1% a year in real terms 4% between 2021−22 and 2%

2025−26. 0%

-2% NHS Total local Local Local Other local Other Welsh government government: government: government Government schools social services spending

Source: Ifan, Guto (2021) Welsh Election 2021: Fiscal outlook and challenges for the next Welsh Government. Cardiff: Wales Fiscal Analysis. Projected funding for Welsh Government day-to-day spending, 2019-20 to 2025-26 (cash terms)

22,000 • Ond os nad oes unrhyw With Covid-19 funding newid i gynlluniau gwariant 21,000 Llywodraeth y DG…

20,000 Pre-pandemic plans scenario • But if there are no changes Baseline scenario to UK government spending 19,000 plans… 18,000

£ million million £ (nominal prices) 17,000

16,000

15,000 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26

22,000 • Byddai cynnydd o 2c ymhob With Covid-19 funding cyfradd o’r Dreth Incwm 21,000 Cymru yn gallu chwarae

rhan er mwyn cwrdd â 20,000 Pre-pandemic plans scenario phwysau gwario a chyllido With 2p WRIT increase Baseline scenario gwasanaethau cyhoeddus 19,000 gwell yn y tymor canolig. 18,000 • A 2p increase in all rates of

Welsh Income Tax could million £ (nominal prices) 17,000 play an important part in meeting spending pressures 16,000 and funding enhanced public services over the 15,000 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 medium-term. Source: Ifan, Guto (2021) Welsh Election 2021: Fiscal outlook and challenges for the next Welsh Government. Cardiff: Wales Fiscal Analysis. Y rhagolwg cyllidol ar gyfer y llywodraeth nesaf The fiscal outlook for the next government

• Bydd y Bloc Grant yn tyfu mewn termau • The Block Grant is set to grow in real real dros gyfnod y Senedd nesaf terms over the next Senedd term

• Ond ar y cynlluniau presennol, ni fydd • But on current plans, spending pressures modd cwrdd â’r holl bwysau ariannu are still likely to go unmet

• Dim llawer o gyfle i’r pleidiau ariannu • Limited scope to fund large manifesto ymrwymiadau mawr yn eu maniffestos commitments without increasing heb gynyddu refeniw / ddibynnu ar revenues / relying on a change to UK newid i gynlluniau gwariant y DG spending plans

• Ai nawr yw’r awr i drethu? • A role for devolved taxes? Fiscal implications of party manifestos

• Main areas of spending and taxation • NHS spending • Schools • Social care • Tax policy commitments

• Overall fiscal plans in manifesto • Welsh Labour • Welsh Conservatives • Plaid Cymru Fiscal implications of party manifestos

• No costings available for most manifesto commitments • We make some attempt to gauge size of some specific manifesto promises – uncertainties to our assessments • Most manifesto promises lack sufficient details

• Difficult to assess whether manifesto programmes are affordable and “fully costed” in the round • Will ultimately depend on fiscal and economic changes over coming years, notwithstanding the possible use of devolved tax powers

• 2021-22 Final Budget plans (and updated for latest forecasts) used as baseline – project costs in 2025-26 (final full year of Senedd term and of UK spending plans) NHS spending

Conservatives • “Enshrine an NHS Covenant into law” – guarantee increased spending on the NHS each and every year. At least an extra 2% rise in NHS budget • ≈£1.4 billion a year extra day-to-day spending in 2025-26 (cash terms increase from 2021-22) • Slightly undershooting consequentials from current spending plans in England to 2023-24 (uncertain for 2024-25 and 2025-26)

• 3,000 more nurses and 1,200 more doctors by 2026 NHS spending

Labour • NHS recovery plan – a £1 billion recovery plan would be launched “on day one”, but unclear over how many years

• No overall medium-term spending plan/commitment to the NHS in the manifesto

• Increase training funding by 8% in 2021 (in baseline already) and train 12,000 doctors, nurses, allied health professionals and psychologists NHS spending

Plaid Cymru

• No overall target growth in NHS funding

• Additional 1,000 doctors and 5,000 degree level health professionals such as nurses, midwives and physios • Slightly above growth in health professionals based on recent trends and likely underlying demand pressures (2.1%) NHS spending

Summary • All parties focus on NHS recovery – vary in detail and scope

• All promising increase in NHS staffing resources – no detail on projected cost and pay implications

• NHS spending will likely need to be significantly higher after the pandemic – all parties relying on further health-related consequentials from UK government or unspecified cuts in other areas Education - schools

Conservatives • “Wales should be spending £1,000 more per pupil than it currently does … We will end this underfunding”

• 5,000 more teachers across Wales – a significant commitment • Given projected pay deals, will cost ≈£230m-£250m a year if achieved by 2025-26 • Our projections show existing teacher cost projected to grow by £148m and other staff and non-staff costs projected to grow by £120m • Would imply ≈£498m a year of additional spending by 2025-26 – above the £337m of consequentials we project from UK government spending plans in England

• Projected costs could be lower if: • Part funded by council tax increases • Slower growth in teacher pay – below average earnings in the economy

• Programme for children in receipt of Free School Meals to cover all school holidays for the whole of the next Senedd term Education - schools

Plaid Cymru • An additional £690m over the course of the Senedd term – reportedly planning £300m a year of additional spending by 2025-26

• 4,500 extra teachers and support staff • Difficult to cost because not only teachers - looks fairly ambitious within given envelope given likely pay cost pressures

• Extending Free School Meals by raising eligibility threshold to cover all UC households initially, and eventually extending to all primary school children • Initial cost of £10m-£20m a year – but highly uncertain • Universal Free School Meals in primary schools - £160m a year by 2025-26 Education - schools

Labour • Recover and raise standards with schools catch up plan

• No indication of overall costs or scale - £11.8m already committed to Accelerated Learning Programme for 2021-22 and £72m package for learners announced last month

• 1,800 additional tutoring staff in schools as long as they are needed

• No specific target for an increase in number of teachers over the next Senedd term

• Expand Free School Meals entitlement “as far as resources allow” Education - schools

Summary • Little detail on scope and cost of any front-loaded ‘catch-up’ plans

• But per pupil funding likely to increase over next Senedd term after falling over last decade

• Education Policy Institute (2021) suggest a multi-year package of £600-£900m could be required – again probably relying on UK government increasing spending

• Some manifesto commitments look quite modest in comparison Education – higher education

• Plaid Cymru promise to: • Reduce maximum tuition fee chargeable to Welsh domiciled students at Welsh universities to £7,500 – would imply a cost of ≈£50m a year for Welsh universities

• Increase Government funding for innovation and R&D by £100m by the end of the Senedd term – unclear whether dependent on devolution of UK Research and Innovation funding Education – higher education

• Conservatives promise to: • Refund tuition fees students who become doctors, nurses or teachers in Wales after their studies

• Compensation scheme for students whose courses have been disrupted by the pandemic

• Cut tuition fees in half for Welsh students studying STEM and modern foreign language subjects at Welsh universities ≈£64 million a year cost for Welsh universities by year 3

• “Boost Welsh Universities’ ability to undertake world leading research” – increasing UK Government Investment Education – other

• Labour make some further education commitments: • International Learning Exchange programme - £65m over Senedd term • Expand Personal Learning Accounts from current pilot – unspecified cost/scale

• Plaid Cymru propose a Lifelong Learning Entitlement – ‘opportunity grant’ of £5,000 to Personal Learning Accounts of every individual over 25 to train or retrain (unspecified cost)

• Conservatives promise to “invest an extra £100m in Further Education colleges – if overall additional spending over the course of the Senedd term, implies spending of £40m a year in 2025-26 – roughly 2% growth in funding per year Childcare and early years

• Labour promise to fund childcare for more families where parents are in education and training and provide baby bundles to more families (current pilot of 200 bundles) – though scale and cost of these commitments not specified

• Conservatives would expand free childcare provision to two-year olds: approx. £40m based on existing costs for 3 and 4-year-olds (£75m in 2021-22)

• Plaid Cymru propose a national free early years education and childcare service – 30 hours a week, free for all children from 24 months. Again, £40m a year to expand current offer; may be more if universal Social Care spending

• All parties are proposing increasing the wages paid to social care staff: • Both Conservatives and Plaid Cymru want a £10 per hour wage for social care workers • Labour want wages in line with the Real Living Wage (currently £9.50). Would imply initial cost of around £19m per year (LE Wales 2020)

• Conservatives want to increase the capital limit to £100,000 for those accessing residential care – difficult to estimate, but based on the cost of previous increases, could be £40m a year Social Care spending (continued)

• Both Plaid Cymru and Labour are in favour of social care free for all at the point of need • LE Wales (2020) estimate the cost of providing free personal care at £131m to £192m in 2021 (on top of underlying pressures)

• Labour want to “pursue a sustainable UK solution” • However, claim “current UK Government shows no sign of changing that” • If UK Government reform not forthcoming: “Consult on potential Wales-only solution to meet our long-term care needs”

• Plaid Cymru want a National Health and Care Service – budgeted £250m by 2025-26 • A Commission will consider longer-term plans: preference of using general taxation Tax policy commitments

• Conservatives make a series of tax-related policy commitments:

• VAT cut for tourism operators: ≈£60m in 2021-22 based on UK costs of policy

• “Jump Start Scheme” – pay employer’s National Insurance for first two staff that micro-businesses in Wales hire for two years (no costings included). 10,000 eligible hires per year would cost approximately £60m

• Freeze Council Tax for 2 years: freeze funding of £80m-£90m in first year (equivalent of up to 6% increase), and then equivalent of 2% increases for the following year (an additional £33m in 2023- 24).

• Scrap LTT for first-time buyers and raising threshold to £250,000 – main cost relating to share of transactions below £250,000 in 2019-20. Given growth in residential LTT, we project cost to be £39m per year in 2025-26

• Abolish business rates for small businesses – 100% relief for properties up to £15,000, and tapered for properties up to £18,000. Would cost £100m-£105m a year based on distribution of properties. No indication of scale of Business Rates Free Zones Tax policy commitments (continued)

• Conservatives are the only party to propose a specific income tax policy change:

• Basic rate income tax cut if jobs target (65,000) reached

• Unlikely to be funded by “more people paying into the pot”

• Block Grant Adjustments made to reflect tax devolution grow in line with comparable UK government revenues. What matters therefore for the effect of tax devolution on the Welsh budget is the relative growth in the Welsh tax base, not the overall growth.

• Additional jobs only creating a ‘surplus’ for the Welsh budget if not matched by growth in tax base of England and Northern Ireland Tax policy commitments (continued)

• Labour’s manifesto promises no increase in Welsh rates of income tax “as long as the economic impact of coronavirus lasts” • Need to see “a strong recovery in personal finances across households” – but income tax would primarily hit those least affected by the pandemic • Would be a ‘balanced budget increase’ – immediate economic impact depending on which short-run multiplier effect is larger. • Although also supply-side effects to consider too (e.g. incentives for income tax payers; perceived impact on competitiveness)

• Also make a commitment to making Council Tax fairer, but no firm commitment

• Consult on legislation permitting local authorities to raise tourism levy Tax policy commitments (continued)

• Plaid Cymru are proposing substantial reform of council tax and non-domestic rates – no indication of revenue effect (we assume cost neutral)

• Also includes second homes tax increases

• Some ‘new’ tax ideas, in the form of a Junk Food Tax and an Eco-levy on road use (seek the devolution over road tax and fuel duty) Fiscal implications of party manifestos

• Spending commitments for the main areas of spending • NHS spending • Education • Childcare and early years • Social care • Tax policy commitments

• Overall fiscal plans in manifesto • Welsh Labour • Welsh Conservatives • Plaid Cymru Welsh Labour – other spending commitments

• Police Community Support Officers – increasing numbers from 500 to 600 • An additional £3.2m (based on current specific grants)

• New system of farm support – but no indication of changing amount

• A Young Persons Guarantee: work, education or training for all under 25s – 125,000 new apprenticeships

• Other commitments to maintain or expand policies (but with no specific costs/scale) Welsh Labour Manifesto

• Very different approach from the other two main parties

• Identifiable and additional spending commitments (either with costs in manifesto or costed by us) amounting to approximately £100m a year by 2025-26 Welsh Labour Manifesto

2,500 • Baseline Identifiable and specific day-to- scenario day spending commitments only 2,000

1,500

1,000 £ million (cash terms) million £ (cash

500 Identifiable and specific spending commitments 0 Manifesto commitments in Cash increase in Welsh 2025-26 resource budget to 2025-26 Welsh Labour Manifesto

2,500 • Baseline Identifiable and specific day-to- scenario day spending commitments only 2,000

• Our assumption on NHS funding: passing on projected 1,500 NHS consequentials (£1.4 billion Our NHS by 2025-26) funding

1,000 assumptions £ million (cash terms) million £ (cash

500 Identifiable and specific spending commitments 0 Manifesto commitments in Cash increase in Welsh budget 2025-26 to 2025-26 Welsh Labour Manifesto

2,500 • Baseline Identifiable and specific day-to- scenario day spending commitments only 2,000 Other manifesto commitments and • Our assumption on NHS funding pressures? funding: passing on projected 1,500 NHS consequentials Our NHS • (£1.4 billion by 2025-26) funding 1,000 assumptions

• Significant ‘headroom’ against terms) million £ (cash even pessimistic baseline 500 scenario increase Identifiable and specific spending commitments • But still tough choices and 0 trade-offs likely Manifesto commitments in Cash increase in Welsh budget 2025-26 to 2025-26 Welsh Labour Manifesto

• Very different approach from the other two main parties

• Identifiable and additional spending commitments (either with costs in manifesto or costed by us) amounting to <£100m a year by 2025-26

• Most cautious/conservative on UK Government spending plans

• Maintains flexibility – suggests path close to the baseline scenario in previous presentation

• Little information on overall fiscal plans and potential trade- offs over the medium term Welsh Conservatives Manifesto

• The Conservative manifesto implies large increase to NHS and schools spending, alongside other specific spending commitments such as on social care and childcare

• Differs substantially from other parties in proposed tax cuts Welsh Conservatives Manifesto

3,500 • Identified spending commitments from NHS, 3,000 schools, and other areas (£2bn) 2,500

• Not included other manifesto Other commitments (e.g. higher 2,000 identifiable spending education spending), nor other Schools commitments spending pressures million £ 1,500 Baseline 1,000 scenario

NHS 500

0 Manifesto commitments in 2025-26 Cash increase in Welsh resource budget to 2025-26 Welsh Conservatives Manifesto

3,500 • Identified spending commitments from NHS, 3,000 schools, and other areas (£2bn) Tax-related commitments 2,500 • Not included other manifesto Other commitments (e.g. higher 2,000 identifiable education spending) nor other spending Schools commitments spending pressures million £ 1,500 Baseline • Income tax cut included in tax- 1,000 scenario related commitments in 2025- NHS 26 500

0 Manifesto commitments in 2025-26 Cash increase in Welsh resource budget to 2025-26 Welsh Conservatives Manifesto

3,500 • Identified spending ‘Pre-pandemic plans’ scenario commitments from NHS, 3,000 schools, and other areas (£2bn) Tax-related commitments 2,500 • Not included other manifesto commitments (e.g. higher 2,000 Other spending education spending) nor other commitments Schools

spending pressures million £ 1,500 Baseline • Income tax cut included in tax- 1,000 scenario related commitments in 2025- NHS 26 500

• Relying on a change of course 0 by the UK government? Manifesto commitments in 2025-26 Cash increase in Welsh resource budget to 2025-26 Welsh Conservatives Manifesto

• The Conservative manifesto implies large increase to NHS and schools spending, alongside other specific spending commitments such as on social care and childcare

• Differs substantially from other parties in proposed tax cuts

• Uncertainty around our estimates of tax and spending policies – but implies little room for other manifesto commitments and spending pressures

• “Clear blue water” between Welsh Conservatives and Conservative Chancellor’s fiscal plans? Plaid Cymru – other spending commitments

• A weekly £35 child payment to help 180,000 children living in poverty

• Set initially at £10 per week, growing to £35 per week, by the end of the first term

• Details on eligibility and costs not given – crude estimate of £300m a year

• For comparison: cost of £10 Scottish Child Payment set to increase to £180m by 2025-26 (though parties are proposing increases)

• Seeking the devolution of welfare powers Plaid Cymru – other spending commitments

• Payments on Welsh Government borrowing - £120m a year from resource budget

• Predicated on lifting of restrictions on Welsh Government borrowing – current annual limit in place of £150m. Plaid Cymru want to increase overall borrowing capacity from £1 billion to £5 billion with no annual limit.

• Use of innovative finance/Mutual Investment Model may be more expensive. Also unlikely to be able to bring projects forward as quickly – cost would be met during future Senedd terms. Plaid Cymru Manifesto

• Costing subject to an Independent 21,000 Assessment from Professor Brian Morgan and Professor Gerald 20,000 Holtham

19,000 Baseline scenario for Welsh resource 18,000 budget

£ million million £ (cashterms) 17,000

16,000

15,000 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 Plaid Cymru Manifesto

• Costing subject to an Independent 21,000 Assessment from Professor Brian Morgan and Professor Gerald 20,000 Holtham Plaid Cymru assumption

• Assuming 2% increase in block grant 19,000 funding – slightly higher than our Baseline scenario for ‘baseline scenario’… Welsh resource 18,000 budget

£ million million £ (cashterms) 17,000

16,000

15,000 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 Plaid Cymru Manifesto

• Costing subject to an Independent 21,000 Assessment from Professor Brian Pre-pandemic Morgan and Professor Gerald plans’ scenario 20,000 Holtham Plaid Cymru assumption

• Assuming 2% increase in block grant 19,000 funding – slightly higher than our Baseline scenario for ‘baseline scenario’… Welsh resource 18,000 budget • … but below our ‘pre-pandemic

plans’ scenario million £ (cashterms) 17,000

• ‘Efficiency review’ - efficiency gains of about 1% per annum to fund new 16,000 programmes

15,000 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 Plaid Cymru Manifesto

3,500 • Cash increase from 2021-22 to Plaid Cymru 2025-26 3,000 block grant assumption

2,500

2,000

£ million £ 1,500 Baseline 1,000 scenario

500

0 Manifesto commitments in 2025-26 Cash increase in Welsh resource budget to 2025-26 Plaid Cymru Manifesto

3,500 • Cash increase from 2021-22 to Plaid Cymru 2025-26 3,000 block grant assumption

• Our assumption on NHS 2,500 funding: passing on projected NHS consequentials (£1.4 billion 2,000 by 2025-26)

£ million £ 1,500 Baseline 1,000 scenario NHS funding 500 assumption

0 Manifesto commitments in 2025-26 Cash increase in Welsh resource budget to 2025-26 Plaid Cymru Manifesto

3,500 • Cash increase from 2021-22 to Plaid Cymru 2025-26 3,000 block grant £35 Child payment assumption • Our assumption on NHS 2,500 funding: passing on projected Other spending NHS consequentials (£1.4 billion 2,000 Free school meals by 2025-26) Schools

£ million £ 1,500 Social care • commitments Not included other manifesto Baseline commitments nor other funding 1,000 scenario NHS pressures funding 500 assumption

0 Manifesto commitments in 2025-26 Cash increase in Welsh resource budget to 2025-26 Plaid Cymru manifesto

• Large and specific spending commitments outside of the NHS and schools in a relatively tight budget context

• Optimistic on increase on UK government spending, but realistic

• Plans require substantial devolution and changes to fiscal framework • Welfare, policing and justice, rail infrastructure, broadcasting, energy projects, some taxes • Substantial increase in borrowing powers – far above Scotland’s level

• Full delivery of manifesto spending commitments looks dependent on ‘efficiency review’ • “Challenging ... not impossible” Summary: fiscal implications of party manifestos

• “The impact of decisions on taxation made by the sub-national government should be clear to taxpayers, and taxation and spending choices should be offered to the electorate in sub-national government elections” Silk Commission Part 1

• Lack of detail on spending plans across the board – Conservatives and Plaid Cymru with far more specific spending and tax commitments than Labour

• As expected, some common themes and priorities – Covid-19 recovery, NHS spending, schools

• Welsh Government budgets will need to be flexible to changing circumstances – little reference to potential trade-offs required across all manifestos DIOLCH AM YMUNO Â NI THANK YOU FOR JOINING US

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