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Spending Review 2015 and Wales

It's going to be controversial. There will be cuts. There will also be changes that could change the way the UK is run, dominate politics for the next four years and seal the fates of the political parties.

There will be much that will affect Wales but I'm expecting some specific changes which will have a significant impact on the amount of money the Welsh Government gets.

The Welsh Government is right to expect major reductions to its spending power because the Chancellor, George Osborne, is looking to find £20bn of savings in public spending as part of his plan to balance the books.

But some of the possible changes could mean significant increases set against the reductions which would cushion the Welsh Government from the deepest cuts.

Here are some of the things to look out for.

Welfare

You can expect cuts to the amount spent on welfare because the Conservatives were elected promising to cut the welfare bill by £12bn.

However George Osborne's plans to cut working tax credits were blocked by the House of Lords as well as opposition from backbenchers in his own party.

That means he has to find a new way of saving £4bn. Restrictions on housing benefit is thought to be the most likely way, but that could affect the same people who were hit by tax credit cuts and so could cause the same resistance from Conservative MPs.

NHS

The Chancellor has already announced significant extra funding for the NHS of £10bn over the next four years with £6bn in the first year.

That should have a significant knock-on effect on Welsh funding because a share of spending on areas that are devolved is passed on to the Welsh Government.

But the First Minister told AMs that the spending is 'reprioritised' from other parts of the health budget so should lead to no extra money for Wales.

Policing

David Cameron has said that counter terrorism will be safeguarded, but George Osborne has refused to rule out other cuts to the policing budget.

Earlier this week the First Minister said cuts to policing could undermine the counterterrorism effort because local officers and PCSOs act as 'eyes and ears' in the community.

Funding for Wales

It's expected that among the Spending Review announcements will be a plan to deal with arguments about the way public spending is shared with Wales.

All parties agree that the method of working out funding - known as the Barnett Formula - has been less favourable over the years to Wales than Scotland.

Although there have been calls for it to be scrapped, the UK Government is committed to continuing with it because of a pledge made during Scotland's referendum campaign.

As a result the solution is seen to be what's known as a 'funding floor' - a mechanism to make sure the amount allocated to Wales never drops below a certain level.

Welsh Secretary Stephen Crabb has repeatedly said that a funding floor would be announced as part of the autumn spending decisions.

At what level that floor should be set isn't clear. After several years of saying that Wales was being shortchanged by £300,000 a year, Carwyn Jones this week said that the proportion is more important than the figures.

Plaid Cymru is prepared to be unimpressed with whatever is announced. Party leader Leanne Wood said:

Yet again the Westminster Government is treating Wales as a second class nation.

Whilst a funding floor ensures that Welsh funding does not drop below a specified level, it does nothing to make up the shortfall in funding that Wales has been denied for many years.

In fact, it locks in the current unfair funding settlement underpinned by the Barnett Formula, which the independent Holtham Commission found amounted to a shortfall of £400m a year.

The funding floor for Wales expected to be announced at the Comprehensive Spending Review will be trumpeted by the Westminster Government as somehow a major advance in securing a fairer funding settlement for Wales. This kind of rhetoric is pure spin and must be resisted.

– Leanne Wood AM, Plaid Cymru leader

Welsh income tax

The law has already been changed to allow future Welsh Governments to take some control of how income tax raised and spent in Wales here but only if voters agree in a referendum.

But there's been a lot of movement behind the scenes to drop the requirement for a referendum. On a visit to the Royal Welsh show in the summer, the Prime Minister dropped a strong hint that he didn't think it was necessary.

In fact that only leaves Labour publicly committed to the necessity of a referendum on the grounds that fair funding hasn't been achieved.

If the First Minister welcomes whatever's announced in terms of a funding floor, that may remove the last barrier to transferring income tax power to the Welsh Government.

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