Welsh secretary rejects public sector cuts fears

Wales' public services will not face cuts despite a shortfall in covering a rise in employers' National Insurance contributions, according to Labour's Welsh secretary.

Jo Stevens' comments appear to contradict the Welsh government's Finance Secretary, Mark Drakeford, who previously warned he was facing a £36m black hole.

Stevens told a committee of MPs that the Welsh public sector would be getting more cash because of record budget settlements. She also said that Wales will receive an extra £200m of consequential rail funding because of schemes being built in England.

The Welsh government said its position on National Insurance had not changed.

In May, Drakeford warned that the Welsh government could not afford to cover the cost of a shortfall resulting from higher National Insurance payments for doctors, nurses and teachers.

On Wednesday, Stevens was asked by Plaid Cymru Ynys Môn MP Llinos Medi what she was doing to "safeguard" public services, with Welsh councils facing cuts.

Stevens replied: "I am not sure I would agree with the assessment that public services are facing cuts.

"There's been record budget settlements for Wales in the autumn Budget last year and in the Spending Review.

"It'll be a nearly £5bn extra for the Welsh government to spend on public services and local authorities are included in that description.

"So there will be more money, not less. So I am not sure where that comes from."

Medi replied that the assessment came from the Welsh Local Government Association (WLGA) because NI compensation had not been forthcoming in full, and that the Welsh government had dipped into its reserves to meet some of the shortfall.

Stevens responded that it was a matter for the Welsh government and the WLGA to determine between them, and that the UK government has waived the drawdown limits to allow Welsh ministers to dip into their reserves.

During the evidence session, in front of the Welsh Affairs Committee, Stevens also revealed that Wales would receive just over £200m of extra funding as a consequence of rail schemes being built in England.

She said it would be "on top of" £445m of rail improvements announced at the spending review in June.

Last year, the UK government increased the amount employers have to pay in National Insurance with the Welsh government - which employs tens of thousands of public sector workers - left with a £257m bill.

Drakeford said that he had added £36m from Welsh government reserves while the Treasury had provided £185m to help plug the gap.

However, it still left £36m to find, which could come from cuts to other services, as Drakeford said the government "cannot afford to cover the entire shortfall".

In April he said it was "wrong" that public services in England would be fully covered, but that those in Wales would not, because of the UK government's use of the Barnett formula.

Barnett is how funding for Wales is usually worked out when there is extra spending in England on matters Cardiff ministers are responsible for.

It is based largely on population size, but the public sector in Wales is proportionately larger than in England.

Labour Blaenau Gwent Senedd member Alun Davies called the decision a "proper scandal". Plaid Cymru said it was "shocking".

Council leaders had also warned of a shortfall across all public services in Wales.

The Welsh government said its position on National Insurance had not changed since a news release it issued on the matter in late May.

On Wednesday, a spokesperson said: "Welsh ministers will decide how to spend funding allocated to Wales based on Wales' needs.

"The Welsh government received £200m in extra capital funding and faced a £30m resource reduction in consequentials from changes to the Department for Transport budget in the Spending Review.

"Consequentials are calculated at departmental level, so no detailed programme breakdown is available."