These cuts were widely predicted and are part of over all cuts in the revenue budget of the UK government £13.6bn.
But Osborne did hold the carrot of capital schemes such as an M4 relief road plan when the government published its response to the Silk Commission on assembly powers shortly.
Clearly such a project would cost about £1billion and points to the Welsh government getting borrowing powers and revenue raising powers from the Treasury.
But Welsh public sector workers will be hit hard as they will lose automatic annual pay increments. This is on top of the limiting of pay increases to 1%, considerably below the rate of inflation. This will also effect, schools, NHS, prisons and police workers.
He announced that the health service and education budgets are protected in England. Consequently the amount coming to Wales under the block grant will be protected.
Cuts in other areas, such as the Department of Communities and Local Government where he announced a 10% budget cut, will reduce the money coming into Wales in grant.
Jane Hutt, Finance Minister said that the effect on Wales would be, “ The Spending Round shows that we are taking a 2% cut between 2014-15 and 2015-16. Overall, our budget in 2015-16 will be £280m lower in real terms than our budget in 2014-15. It’s also worth remembering that these cuts come on top of those we have already had to manage since 2010 – so by 2015-16, our Budget will be lower by £1,680m in real terms than it was in 2010-11.
“I have repeatedly called on the UK Government to boost the funds available for capital investment so this is a disappointing capital settlement – which does not increase the funding available – will do little to boost the economy. This is a missed opportunity.
“Our capital budget in 2015-16 will be a third lower in real terms than in 2009-10. And almost £180m of our capital, which is an unprecedented 12% of the total, is subject to restrictions and can only be used for loans and equity investments. This means that there is a cut in the funding available for real capital investment from 2014-15 to 2105-16 of more than 5% in real terms.”
The Wales Office, the Whitehall department that represents Wales in the UK government, has agreed a cut of 10 per cent in its running costs.
The chancellor’s cuts are a consequence of a slower than expected economic growth and deficit reduction.
But as had been flagged up by the Labour Opposition spokespersons, including Owen Smith MP the shadow Welsh Secretary they will stick to the overall budget cuts if they gain office. So there will be little to ease the pain if there is a change of government in Westminster.
Announcements on infrastructure expenditure will be made tomorrow but are unlikely to kick in anytime soon to ease the depressed state of the economy.