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WAG uses reserves to defer spending cuts

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Capital spending projects in Wales will be protected from this year’s cuts, the budget minister has announced.

School and health building projects are amongst those that will benefit from the decision not to pass on the £49m cut in capital spending announced by the UK government in May.

However, a £113m cut in revenue spending will be implemented this year, business and budget minister Jane Hutt said.

Following six weeks of consideration and talks with the UK Treasury, Ms Hutt said the Welsh Assembly Government (WAG) had decided not to take up the option of deferring the budget reductions until 2011-12 - even though the Barnett formula’s “underfunding” of Wales meant “these reductions will hit Wales harder than other parts of the UK”.

Wales’ share of the £3.2bn cuts announced by chancellor George Osborne are equal to 1% of WAG’s 2010-11 total budget, and deferring them to next year would mean a 1.7% cut in revenue and 6.7% cut in capital funding in 2011-12.

“This is not in the best interests of Wales and certainly not what the people of Wales would expect from us,” she told AMs.

The use of WAG reserves to defer the cuts to capital spending was necessary, she said, because it would support the construction sector and economic recovery.

Details of where the revenue savings will be found will be worked out later in the year, but Ms Hutt said the government would not take money out of “key policy priorities and especially, without taking risks with the fragile economic recovery”.

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