Devolved administrations call for greater engagement and clarity ahead of Spending Review

Date published: 6 August 2015

Arlene Foster MLA, Minister for Finance and Personnel (Northern Ireland), John Swinney MSP, Deputy First Minister and Cabinet Secretary for Finance, Constitution and the Economy (Scotland) and Jane Hutt AM, Minister for Finance and Government Business (Wales) met in Edinburgh today to discuss matters of common financial interest to the devolved administrations.

The agenda included working with the UK Government on follow-up to the Summer Budget and in the lead up to the Spending Review; constitutional developments; and investment in infrastructure.

· Summer Budget 2015

The devolved administrations have been disappointed by the lack of communication and engagement by the UK Government in respect of its recent fiscal announcements, particularly in respect of the in-year cuts announced on 4 June as a result of the UK Government’s on-going austerity plans and measures announced in the Chancellor’s Summer Budget on 8 July. There was agreement that the cuts were too deep and too fast. There appeared to be neither advance notice nor consideration of the implications for the devolved administrations.

While the Finance Ministers welcome the UK Government’s commitment to engaging on certain measures announced in the Summer Budget, such as the use of the Vehicle Excise Duty to fund road investment, they agreed that urgent clarification is required on how these initiatives will operate in the devolved territories, including the proposed Apprenticeship Levy.

· Spending Review 2015

The devolved administrations noted that the planned Spending Review outcome date of 25 November left very little time for setting of their own budgets before the beginning of 2016-17, with potential negative consequences for delivery partners. They therefore called on the UK Government for as much early engagement as possible during the Spending Review process on the implications of likely funding settlements for the devolved administrations.

The Finance Ministers proposed that, as part of the Spending Review, the inter-governmental fiscal arrangements should be updated. The Statement of Funding Policy was last updated in 2010, and significant policy changes have happened since then, including devolution of taxes and borrowing powers.

The Finance Ministers also noted that they would expect HM Treasury to apply the Barnett formula fairly, consistently and correctly, helping to ensure that the devolved administrations budgets receive their fair share of consequential funding from comparable spending in England. This should include infrastructure investment relating to HS2.

For the Welsh Government, there will be the particular need to specify the funding floor mechanism that has been promised by the UK Government.

· Constitutional issues

The Finance Ministers discussed a range of matters of common interest, including the scale and timing of proposed further fiscal devolution to Wales, Northern Ireland and Scotland; and agreed to maintain regular contact at Ministerial and official level to share experience and ensure a consistent approach.

· Sustainable economic growth

The Finance Ministers also discussed the importance of maintaining investment in vital infrastructure in the face of financial austerity, to maintain and develop economic capacity, productivity and living standards. The Finance Ministers also discussed the growing pressures facing the agricultural sector.

· Finance Ministers’ quadrilateral

The last Finance quadrilateral took place in November 2013 and the Finance Ministers agreed that it is important that another quadrilateral takes place in advance of the UK Government’s Spending Review in November. The devolved administrations agreed to seek an early meeting with the Chief Secretary to the Treasury with a view to discussing the matters arising in advance of the Spending Review.

Northern Ireland’s Finance Minister Arlene Foster said: “It is vitally important that Northern Ireland, Scotland and Wales work together ahead of the Spending Review to ensure we get the best possible outcome for our devolved administrations. We are seeking early engagement with HM Treasury and will collectively present our agreement on pertinent issues. We will also press the Treasury to provide as much detail as possible on our settlements in advance of the Spending Review outcome to allow the devolved regions to be able to plan budgets for much needed public services.”

Welsh Government Finance Minister Jane Hutt said: “It has been extremely useful to meet with the finance ministers from Scotland and Northern Ireland to discuss a range of fiscal matters of common interest. It is clear from today’s meeting that we share similar concerns, in particular around the UK Government's pace of austerity and its impact, the need for clarification on measures announced in the Budget and the late timing of the Spending Review. We all also recognised the importance of boosting investment in infrastructure to support economic growth. I am very pleased that we have agreed to work together on these important issues.”

Scotland’s Deputy First Minister John Swinney said: “I will continue to work closely with my Wales and Northern Ireland counterparts to make the case for the best possible outcome from the UK Spending Review. The Scottish Government will do everything possible to mitigate the impact of the UK Government’s austerity as we focus on our priorities of growing the economy, protecting public services and tackling inequality.”