The following amendments have been selected: amendment 1 in the name of Paul Davies, and amendment 2 in the name of Julie James. If amendment 1 is agreed, amendment 2 will be deselected.

I'm going to move on now to item 8 on our agenda, which is the Plaid Cymru debate on the UK Government budget and Wales. I call on Adam Price to move the motion.

Motion NDM6595 Rhun ap Iorwerth

To propose that the National Assembly for Wales:

1. Notes that the recent UK Government budget announcement:

a) did not contain specific new announcements for Wales; and

b) included downward revisions for economic growth, productivity and business investment.

2. Believes that the anticipated changes to the Welsh block grant reflect a continuation of failed austerity measures instead of new resources.

3. Regrets that the UK Government budget announcement did not commit any support to the Swansea Bay Tidal Lagoon.

4. Calls on the Welsh Government to take steps to lift the public sector pay cap.

5. Urges the Welsh Government to secure greater decision-making powers over infrastructure investment and the Welsh economy.

Motion moved.

Thank you, Deputy Presiding Officer. I was going to say it's a pleasure to rise to introduce this debate, but, actually, if we look at the substance of what we're discussing, then pleasure is anything but what one must feel. I was struck when I took part in the Wales Live debate on the budget that the BBC held, and they did a montage, actually, of television reports from BBC Wales news going back over decades in response to the budget, and vox pops all over Wales. And, you know, you could see the historical continuity, the contours of Welsh economic history, opening up in front of you, because 'nothing in it for Wales' was basically on the lips of people in sepia-tinted pictures from the 1960s right through to today: 'nothing in it for Wales'. And that's not a kind of neat Plaid Cymru press release headline; I think that is the lived experience, actually, of most of our people going back over generations. Because of the centripetal nature of the political forces in these islands, that is reproduced time after time after time in the economic priorities—there is nothing in it for Wales. And so, yes, it can't have come as a surprise. It came as a huge disappointment.

Now, this golden opportunity with the tidal lagoon—we have to be there: we were at the birthplace of a few industries a couple of hundred years ago in the industrial revolution. Well, here's a chance for us to have our time to be at the birthplace of a new industrial revolution, and that's an opportunity that we cannot afford to lose. We're not asking for charity as a country, we're asking for help to help ourselves. That's what you're asking for: the opportunity to actually marshal the skills and the natural resources that we have to the benefit of our society, and yet, that opportunity is yet again denied us.

So, that continuity was there. The other continuity, which again was no surprise, but was certainly a disappointment, was the continuity of the austerian economics, I suppose we could call it. We could call it that, but there are few economists of any repute who actually would support it now—even the Austrian School actually wouldn't support the kind of austerian economics we're seeing from this Government. And there's a very, very good reason why. It's because we are entering, I think, some of the most troubling and worrying economic times that we have faced for many a generation, and the bit that was new, of course, in the budget was the downgrading of the growth forecasts. The Office for Budget Responsibility—which, actually, it's fair to say, over many years has constantly had to revise downwards its forecasts on productivity—finally came up front with a revised growth forecast, which was very, very significant, actually, because Members should know that only two years ago, the OBR was forecasting 2.5 per cent growth. So, it's actually almost close to halved that forecast. 

There was a bit of hyperbole, maybe, in Larry Elliott calling this the Suez of British economics, in that the budget was the time when we realised we were no longer the force in the world that we once thought we were. But the Chancellor himself did admit, of course, that the UK is now no longer in the top five economies; it's probably going to be overtaken by India and, I suspect, certainly by the end of the decade. And if you step back and look at the broader picture, this is a very, very pessimistic scenario. You could say that this is the equivalent of our lost decade—that phrase that, of course, came to describe the particular circumstances of Japan, following their property crash in the early 1990s. We've had a lost decade in Britain. We had the Resolution Foundation pointing out that this is, depending on how you measure it, the longest period of falling living standards, certainly for 60 years—some would argue that you can go back even further than that.

We've had an average of 1 per cent growth in growth value added terms over the last decade. You've got to remember that the long-run trend of the British economy is around 2 per cent. This is as significant as it gets. In social terms, obviously, if you're bumping along at about 2 per cent and 2.5 per cent, actually that leads to rising living standards. At 1 per cent, it leads to the kind of fall in real living standards that the Resolution Foundation is pointing out.

Will you give way?

Yes, certainly.

Thank you very much. I've noted, of course, that the economist in the International Monetary Fund last year warned that austerity policies will do more harm than good. That's coming home to roost now, as you say, with the downgraded growth forecast. But also, would the Member agree that it's increased inequality that also hurts the level and sustainability of growth and that's what the IMF has said?

The Llywydd took the Chair.

Absolutely. I think there are deep structural reasons why we are in the crisis that we're currently facing and the Institute for Public Policy Research's work on the Commission on Economic Justice points to that. There's both a conventional social inequality aspect and that is also reflected in a territorial inequality. In our case, of course, they're both intermingled. Unless you address that, actually, you can't really get out of this rut that we're in.

If you look at the figures as well, we've had 1 per cent growth—a very poor level of growth—over the past decade. In every decade since the 1970s, there's been an actual recession—negative growth. We haven't had that yet. That's what we're staring into at the moment. Because if you think about it, even the 1 per cent growth that we've had has been based on increased labour resources, because of falling unemployment, a record employment rate, high—I have to say it—immigration and also people working longer hours. All of those things are either going into reverse, in the case of migration, and with working hours et cetera, there's a natural limit to the ability of the economy to sustain itself simply by adding labour input. That ship has now sailed. We are now at the limit of that.

The real leading indicator, of course, is output per hour—actual productivity. That hasn't grown for a decade. That is unprecedented for an advanced economy like the UK. So, things are bad. Certainly, I think that all the indicators are that they're going to get much, much worse, and I haven't even mentioned the 'B' word. I'm trying to be judicious and objective about this. Let's take the politics out of it. Certainly, in the short term, this is going to be a very disruptive period in the economy. There will be winners and losers and you can take your pick where you put you finger on the dial on that one. But we are in probably the most trepidacious period economically that we have faced for a generation.

What are the implications for us in Wales? well, I think what we have to do—. We cannot insulate ourselves from these broader macro-economic influences—absolutely not; that's clearly the case. But we must try to arrogate to ourselves as many levers and as much autonomy as we can within this difficult economic, and even worse political context. The late Rhodri Morgan used to talk about the way in which the Welsh economy had carved out a place for itself in a division of labour, effectively—a territorial division of labour across the UK. And in some senses, there was some kind of compact—there was some kind of territorial and social compact. There was a niche that Wales, for a period, actually carved out for itself by agreement. All that, of course, has been thrown up; we haven't had a regional economic policy in the UK, properly speaking, for over 40 years. And so that territorial compact has gone, and in those circumstances, while we can't insulate ourselves completely, we have to try and chart as much of our own course as possible.

The one bit in the UK budget, the one point amidst all the gloom—there are always some points of light—and interestingly, the one bit where, actually, it goes completely contrary to everything else in terms of the direction of travel, is the publication of the industrial strategy. So, here you have a reinvention or a reintroduction of an idea from 40 or 50 years ago, which was a sister to regional policy, and actually, there you have, for example, the biggest increase in research and development spending—about £4.7 billion increase over the period in question—that we've seen for 40 years in terms of innovation policy. Now, you've got to to remember that, in a £2 trillion economy, £4.7 billion is not going to answer all our problems. But that is an important lever, and we in Wales need to make sure, because we've been quite poor in the past, actually—we've never got our fair share of Research Councils UK's money in terms of the universities, we've never got our fair share of Innovate UK money in terms of industrial innovation policy. We have to be far smarter at actually making sure that we can take advantage of those few positive opportunities that there are on the horizon, and also make sure that we have the structures and the levers in place, so that we can use that money in the smartest and most intelligent way.

And I have to say to the Welsh Government as well, at a time when the UK Government—the one thing it is doing, which I do agree with, is vastly increasing the investment in innovation and in other areas of productivity enhancement. We are cutting, slashing our innovation budget. The innovation budget expenditure limit line in the Welsh Government's draft budget is being cut, capital and revenue together, by 78 per cent. That is surely economic madness, economic idiocy, at a time when we have to reinvent ourselves for the very reasons that I've set out, because we are entering very, very uncertain times indeed.

I have selected the two amendment to the motion. If amendment 1 is agreed, amendment 2 will be deselected. I call on Nick Ramsay to move amendment 1, tabled in the name of Paul Davies. Nick Ramsay.

Amendment 1. Paul Davies

Delete all and replace with:

To propose that the National Assembly for Wales:

1. Notes the £1.2 billion increase in the Welsh budget over four years as a result of Barnett consequentials resulting from the UK budget.

2. Notes the £67 million increase in the Welsh budget as a result of the fiscal framework negotiated between the Welsh and UK Governments.

3. Notes the commitment in the UK budget to commence formal negotiations for a north Wales growth deal.

Amendment 1 moved.

Diolch. Oh, Adam, Adam, Adam, I must say, I enjoyed your speech a little bit more than the motion itself. You did at least get to the glimmer of light at the end, which made it worth while me getting up in the morning, I suppose, and coming to work, and you did mention the budget at the end.

Look, referring to the motion itself, I do like to be positive about some aspects of motions and there wasn't much that was positive in this motion, to be fair. I don't think this UK Government would proclaim to be the best thing since sliced bread, but I do think it does deserve a little bit more credit than you gave it there, at least, and in this motion.

It's not my job to come here and defend the UK Government, even though it's my party that is in power there. It's my job to come here and represent my constituents in the National Assembly for Wales and to talk about what we can do here in this Chamber. And that's why I was a little disappointed by the tone of this motion, because I do think it rather dwells on the negative and doesn't talk about the positive: what we can do. [Interruption.]

If we can just turn to our amendments, we wish to note the £1.2 billion—[Interruption.] You'll get a mention in a bit, Simon, don't worry. We wish to note the £1.2 billion increase in the Welsh budget over four years as a result of this budget. Now, I know I'm going to anticipate the finance Secretary's response later in saying that a proportion of that money is financial transaction capital. This was mentioned by the Chair of the Finance Committee in the session we had earlier. It's a term that's reared its head and I'm not sure it is the talk of breakfast tables up and down Wales, but as the finance Secretary will probably tell us, it does make it more difficult to deploy. But, as I’m sure the finance Secretary would recognise, it is at least more money coming to us than we had before, and that’s key to this budget: there is additional money coming to Wales, so it is not all doom and gloom.

We must, of course, welcome the proportion of that additional finance that is coming to Wales as a direct result of the hard-fought fiscal framework negotiated between the Welsh Government and the UK Government. As the Cabinet Secretary has said, very fairly, it’s not an enormous sum of money in terms of the Welsh budget as a whole, but it is additional money that would not have happened without this agreement, and I pay credit to him in those negotiations, and indeed the UK Government. I’m pleased that I had a small role as well, along the way, in helping with that process.

I’m not even saying we should shut the door on future Barnett reform. I think there is still a case, which we don’t tend to talk about anymore, but there is still a long-term case, I think, to review the mechanisms that fund Wales overall. Perhaps that can be done in conjunction with the fiscal framework, because I think all of us here would want to have the best deal for Wales possible, and over time, financing mechanisms do become out of date. So, hopefully that can be discussed in future when we’re looking at the UK’s budget allocations.

Of course, our amendment also notes progress that has been made with the north Wales growth deal. We’ve called for that for a long time. It’s in this budget, so it’s good news. I didn’t hear it get a mention—I might have missed it. It didn’t seem to get a mention in Adam Price’s comments. It didn’t seem to be mentioned in the motion, either. How many times do Members in this Chamber, particularly Members from the north of Wales, stand up and say in debates that we don’t think that there’s enough going to the north of the country, and that there’s not enough going to rural parts of Wales? So, here is an example where there is a focus on a part of Wales. Adam Price is quite right, parts of Wales have been neglected in the past, and here there is an attempt, at least, to in some way rectify that.

I heard what you said on the progress, or lack of progress as you saw it, with the Swansea bay tidal lagoon, and we will continue to call for that. We believe that the tidal lagoon is a very important piece of infrastructure for the Welsh economy. Okay, it might not have been prevalent in this budget, but it is well-known that we are still calling for that tidal lagoon—and not just this party, of course, but the party opposite and the party of government. It’s very close to Mike Hedges’s heart as well, I know, so we will continue to look for progress on that.

Of course, we are getting electrification of the Great Western Railway line—to Cardiff, I admit, before you jump up. The Severn tolls are being scrapped. How long have we been calling for that? That’s good news, isn’t it? So, that’s another glimmer of light at the end of the tunnel, or at the end of the bridge, if you pardon the pun. So, that’s a commitment from the UK Government that’s going to happen. Also, of course, there’s the commitment of the UK Government to fund the future maintenance of that bridge, without that cost falling solely upon us here in Wales. So, that’s good as well. Let’s acknowledge the positives.

If I can just mention the Welsh Government amendment very briefly, I was rather bemused that it deletes point 4 of the motion and then reinstates it in a reworded format that basically says the same thing, but tries to blame the UK Government instead of blaming the Welsh Government. But I won’t intervene in private grief between Plaid and Labour on that.

Adam Price, you made some very good points—as you always do, to be fair—but I do think you could have been a little bit more upbeat about the prospects for our economy. I’m grateful you didn’t mention the 'B' word, because I think we’ve all had enough of that being mentioned over the last few weeks. But there is more than a glimmer of light at the end of the tunnel, and let’s all of us in this Assembly work together to send a positive message to the UK Government: yes, give us more support in the future, but at least we’re getting somewhere.

I call on the Cabinet Secretary for Finance to move formally amendment 2 tabled in the name of Julie James.

Amendment 2. Julie James

Delete all after point 3 and add new points:

Calls on the UK Government to lift its self-imposed public sector pay cap and fully fund a pay rise for all public sector workers.

Calls on the UK Government to devolve greater decision-making powers over infrastructure investment to Wales to support the Welsh economy.

Amendment 2 moved.

Formally.

Thank you to Nick Ramsay for at least trying to justify the budget, but in our opinion, Wales is losing out as a result of the announcement of a budget that was designed to grow the economy of the south-east of England at the expense of every other part of the United Kingdom.

It’s a budget of austerity in every way. Not only were we promised more financial austerity from the Chancellor; we were also reminded of the poverty of ambition of the Conservatives, and their lack of compassion when it’s a matter of dealing with the most vulnerable in our society. Very few subjects have emphasised this better in recent months than universal credit.

Perhaps we need to give a cautious welcome to the Chancellor’s confirmation that a package of £1.5 billion would be released to get to grips with the numerous problems that have arisen as a result of the introduction of this very deficient scheme. But, perhaps that was an admission that the system is breaking down, truth be told.

At last, after thousands of individuals and families have suffered unnecessarily, the Westminster Government will be getting rid of that seven-day waiting period. Despite that, the budget hasn’t gone far enough for the people of Wales with regard to welfare reform. Thanks to the IFS report on child poverty, we know that in Wales we’ll be amongst the areas that will be suffering most as a result of welfare reform. Already I see far too many people being forced to turn to food banks and facing being evicted from their homes as a result of the mess that the Conservatives are making of welfare payments. When it’s a matter of safeguarding some of our most vulnerable in society, the writing is on the wall.

It’s time to devolve the administration of some elements of the welfare system to Wales if we are to safeguard our citizens from the activities of the Conservatives at their worst. This would enable the Welsh Government to vary the frequency of payments, to put an end to the waiting times and sanctions, and to ensure that individuals and not households receive payments. This is already happening in Scotland. There, the SNP Government has changed the frequency of payment from monthly payments to every fortnight; the housing element is paid directly to landlords; and Ministers have to provide support for people who have the right to receive it.

Of course, it all comes down to money and many have alleged in this Chamber that Wales can’t afford to take the reins of an element of the welfare system, but there is a valuable lesson to learn from Scotland. The funding to administer those elements that were in the hands of Westminster previously transferred directly to Scotland as part of the block grant, so there wasn’t an additional cost. So, I call on the Welsh Government to negotiate a similar settlement so that we can administer some elements of universal credit and the welfare system ourselves. Then, we can safeguard the citizens of Wales from the cruel policies of the Conservatives in Westminster. It’s time to demand the devolution of flexibility of payment and the housing element of universal credit, with the objective of ensuring a fiscal framework that can facilitate the devolution of those elements.

This is a golden opportunity to prove the value of devolution as a tool that works for the benefit of the people of Wales. We’ll show that there is a more just way, a more equal way and kinder way of governing. We’ll show a willingness to implement elements of the welfare system ourselves, to show that there is a better way of doing things for the benefit of our most vulnerable people in society.

The Conservative Government in Westminster now appears to accept low growth, low productivity increase and stagnation or a reduction in real wages for the many as a new form of economic reality. Can I say, from the start, I don't accept that? Low productivity is a direct result of Government policies. Pay is low; it's easy to reduce the hours or terminate the employment of workers; many companies have serious concerns for the direction the economy is moving in. Then, it is inevitable that investment in equipment that would increase productivity will not take place, and the consequence of that is a further slowing of productivity increase.

It would be churlish not to welcome the additional money—£1.2 billion is a large figure. The revenue budget will increase by £215 million and the capital budget will increase by approximately £1 billion, over 4 years, equating to just under £54 million of extra revenue a year. Or, as Andrew R.T. Davies just described it, enough to get Betsi Cadwaladr out of trouble. Whilst welcome, this is not the sort of amount to end austerity. It's certainly not economy-changing.

Of the £1 billion capital, £650 million of additional capital funding is in the form of funding that must be paid back to the UK Treasury, and there are tight restrictions on what it can be spent on. So, that leaves £350 million, or just under £90 million a year. When you actually take it down to what it actually comes down to, you discover it's nowhere near as mouthwatering as the Government tried to make it.

However, even with this additional funding, the Welsh Government’s budget will be 5 per cent lower in real terms in 2019-20 than it was in 2010-11. The Conservatives are following the same failed policies of Herbert Hoover in 1930s America, when he managed to turn a recession into a depression. Just remember this, as Adam Price said earlier, we haven't had a downturn of our economy yet, which comes every 10 years or so; we're awaiting that. And, despite that, we're still doing very badly as we move along the bottom. The recession is yet to come.

It took the new deal of Franklin Roosevelt to get the American economy growing. It will take the new deal of Jeremy Corbyn to get the British and Welsh economies moving. The Conservatives used to say they were running the economy like a household runs theirs. If households followed their policies, then no-one would ever buy a larger house or increase their mortgage.

I agree with that part of the motion that we should regret that the UK Government budget did nothing to commit to the Swansea tidal lagoon. You have to invest in new technology. We know that tidal lagoons are reliable in terms of electricity production. We know that they are a renewable energy. In fact, somebody can tell me what the tides will be in 100 years' time. This is a technology that, by the tidal bore of the Severn, gives us in Swansea a huge advantage, where the tidal range is the second-highest in the world, reaching a maximum of 50 ft. We have an advantage as a country; we need to use it. 

Tidal lagoons will be built; one will be built in Swansea. The question is when. If we are the first, then we develop the technology, we develop the supply chain and we become an exporter of the technology. If we are number 20, we become an importer. That's what happened with wind turbines. Wind turbines are now designed and made in Denmark and Germany, because they were there at the very beginning. You need to be there at the beginning to develop an industry. Where the design skills exist, they build up the supply chain. They get all the advantages. That's why, when we have wind turbines coming in, we see them coming in by boat and then being transported to wherever they're going by the very big lorries or back by boat out to sea. But we know that they've got the advantage because they were there first, and it's really important that we are there first.

Public sector workers are paying the price for the banking crisis and the Tory failing austerity measures. Plaid Cymru calls on the Welsh Government to take steps to lift the public sector cap. What they forgot to add was 'And more redundancies in the Welsh public sector.' As the Welsh Government has basically a fixed income, with only small amounts due to its tax policies and any income it gets in, then every penny it spends on something has to come off something else—. Sorry.

Given your comments about the banking crisis, how would you respond to the January 2009 IFS publication, which said that

'Labour entered the current crisis with one of the largest structural budget deficits in the industrial world and a bigger debt than most OECD countries, having done less to reduce debt and—in particular—borrowing than most since 1997.'

In other words, it broke the Keynesian economic cycle and bequeathed austerity.

Well, that's not true, is it? I don't think anybody believes that—the bequeathing austerity bit. I mean—

It's the IFS.

Will you take an intervention from me as well? Just on the public sector pay cap, our point in Plaid Cymru really is quite simple: you made a pledge in your election manifesto earlier this year to get rid of the public sector pay cap. You are in a position in Welsh Government here to get rid of it. Whether you think it's possible or affordable or not is neither here nor there. You said you would do it and—[Interruption.] You're not—[Interruption.] You said you would do it; you have the option to do it; you're not.

It was a general election manifesto, and if we'd won the general election, it would have been raised. It would have been raised in England, Wales, Scotland and Ireland. That's the point—

What's that got to do with it?

Because, if you do it, you're going to bring redundancies. I think the Welsh Government have got it absolutely right in asking for support that it should be raised and the money should come from Westminster. We were going to—. Sorry to—

You can do it.

Labour were going to do these things if we'd won the general election. You put a lot of things in your manifesto for the last Assembly election. Shall we hold you to account for the all the ones you haven't achieved because you're not in power?

Can I just make one very important final point? Following on from yesterday’s debate on entrepreneurship, unless the contracts are made small enough for Welsh companies to bid for, the full benefits will not be felt in Wales.

Finally, the Welsh Government is failing the people of Wales and Britain.

The UK Government’s budget announcement was not revolutionary and, while the additional funding for Wales is welcome, it was disappointing that there was no announcement on the Swansea bay tidal lagoon.

It has been nearly a year since the Hendry review was delivered to the UK Government, yet we have been met by nothing but silence from UK Ministers. More worrying than the lack of any mention of the lagoon by the Chancellor was the document published alongside the budget that outlined there would be no new subsidies for low-carbon electricity for at least another eight years.

There was hope that the lack of any announcement in the budget was due to tidal energy featuring highly in the UK Government's industrial strategy. Alas, the industrial strategy made no mention of tidal energy in Wales, focusing instead on maximising the marine economy of the highlands and islands of Scotland. All of us in this Chamber want to see Wales at the forefront of tidal energy, and I hope that the lack of news on this issue from the UK Government is—[Interruption.] Yes, certainly.

I take it back; I thought Adam Price's contribution was bidding for the depressing element. You've just mentioned the highlands and islands of Scotland. Isn't it good that the highlands and islands of north Wales are going to get a north Wales growth deal, because we finally got that commitment?

[Interruption.] Yes, certainly. All of us in this Chamber want to see Wales at the forefront of tidal energy, and I hope that the lack of news on this issue from the UK Government is not a signal of bad news to come. Despite the lack of clarity on the tidal lagoon, the autumn budget did deliver some good news for Wales.

We have seen an increase to the Welsh budget as a result of the new fiscal framework and an extra £1.2 billion over the next four years. It is now up to the Welsh Government to maximise the benefits for Wales from both the additional budget funding and the UK’s industrial strategy—and I will be watching this point constantly.

Wales continues to be one of the poorest parts of the UK—in fact, one of the poorest parts of Europe—and I urge the Welsh Government to utilise the additional moneys to fund schemes to tackle the widening wealth gap that exists between Wales and England. Yesterday, the Social Mobility Commission published their 'State of the Nation 2017' report, which highlights that average weekly earnings are much lower in Wales than they are in England, and that a quarter of people in Wales earn less than the voluntary living wage. The report highlights the fact—[Interruption.] Sorry. Yes.

Thank you—thank you for taking an intervention. Yes, you're right to point out that there's been more money put in this year, in the top-up, but, if you actually look at the real figures, we will now be 7 per cent lower. We will receive 7 per cent less, in real terms, than we were having before this Conservative Government came into power. So, I think the real figure is—. And I hope you'll agree with me that handing down little amounts of money to make it look good for a headline buries the reality that we are still worse off. 

Yes, and we have to manage what we get very, very carefully. The report highlights the fact that the Neath Port Talbot local authority area is the worst area in Wales for social mobility. The stark truth is that nearly a quarter of our population are living in poverty despite two decades of Welsh Government economic policies and in excess of £4 billion of structural funding from the European Union. The fact that our young people are being left behind is not a result of austerity but the result of failed economic policies here in Wales. [Interruption.] Yes. We can’t rely on John McDonnell’s magic money tree, nor can we saddle our young people with even more debt—which we are doing at the moment. We are saddling young people with debt. We therefore have to think smarter and spend smarter. I urge the Welsh Government to use the additional £1.2 billion that came out of the UK budget to improve social mobility in areas like Port Talbot.

I also wanted to talk a little bit about the missed opportunity in this budget around energy and industrial strategy. It was quite disconcerting to hear Caroline Jones say some things that I would agree with, but there we are. We've got an agreement on some of these things, and this particularly turns around the missed opportunity, of course, around the tidal lagoon. At the beginning of my remarks, I state very clearly I'm a community shareholder, as hundreds of people are in the Swansea bay area, in the tidal lagoon, because people want to see this development move forward and take place. 

It is disappointing not to have a statement in the budget around the tidal lagoon, but it is even more disappointing, I think, to see the lack of detail in the industrial strategy around tidal energy. I don't think it's betraying any confidence to say that, when we went to meet with Greg Clark as committee Chairs in the summer and following a debate in this Assembly, when we all voted in favour of the principle of the tidal lagoon, though we weren't expecting anything to be said at that meeting, the Minister there was very keen to emphasise how important the industrial strategy would be for tidal development, not just in Wales but throughout the UK. And what we end up with is an industrial strategy that virtually doesn't talk about—well, it doesn't talk about tidal lagoons at all, and doesn't talk about tidal development in Wales. It does talk about Scotland, and I'm concerned there, because it leaves us in a situation where the tidal development that we are already seeing in Wales, which is off Pembrokeshire and Anglesey, in a number of wave and tidal developments that the Welsh Government has invested in, seems to be completely ignored by the UK-wide industrial strategy.

So, there's a huge, complex issue to be addressed in this budget around support for new green technologies or decarbonising our economy, and it's reflected as well in the debate around the compact for difference, because that's been in discussion around the tidal lagoon for at least two years. We've had an independent report, the Hendry report, that says the tidal lagoon can be a pathfinder for this technology. I very much agree with what Mike Hedges said—if we do it now, we're the ones that will benefit from that early investment. Yes, there is investment up front, but that pays off many times over in our skills development, in our industrial development here in south Wales. Other than that, we become the recipients of whichever Chinese company decides in 15 years' time it would like to build a tidal lagoon in Swansea bay. I think there's a complete misunderstanding of the need to get ahead of this investment.

Now, it has been said, and it is true, that the Treasury in the budget and the papers around the budget says there's no new low carbon electricity levies or compact for difference likely before 2025. That's been mentioned already. However, there is still about £0.5 billion in the Department for Business, Energy and Industrial Strategy for low-carbon technologies, and I still think there's an opportunity for the Welsh Government to press for that to be utilised for the Welsh projects as well. I'll give way.

Does that mean Hinkley Point?

Well, you've put your finger on it. It could mean lots of technologies. It's not yet identified for which technology, but I think it's reasonable for the Government, on behalf of everyone in Wales, to press for that to be accessible for a technology such as the tidal lagoon.

We also got today a very interesting—and I fully support it—position paper on onshore wind and solar, which the Government launched with the support of numerous organisations, including community co-ops, the National Trust, RenewableUK, Country Land and Business Association Cymru, talking about the need for investment in—forget about tidal lagoons, what about the investment in renewables of wind and solar that we can do tomorrow? It sets out some of the incredible, to reiterate Adam Price's earlier points, difference between investment in England, Scotland and Wales on renewable technology. So, wind projects, for example, in the most recent allocation of UK Government renewables investment: 2,300 MW capacity installed in England with UK Government support, 1,000 MW capacity installed in Scotland, and 0.05 MW installed in Wales as a result of UK Government support. That's reflected in the UK industrial strategy. Those are figures from the Welsh Government's own statement today, which I think just underlines, if we had control of our own resources, we wouldn't just be going ahead with the tidal lagoon; I think we'd be really motoring ahead with solar and wind, onshore and offshore, and decarbonising the wider economy with transport systems and going beyond electrification to Swansea, which we never got—a broken promise—but going direct, perhaps, to hydrogen trains and a real, exciting offer for the metro in south Wales.

The final thing that I just want to mention is there is mention of a north Wales growth zone. There's also mention of a mid Wales growth deal, and we need to understand—. Before we can celebrate this, I have to say, let's understand what it is. Is it an extra train to Newtown or is it a genuine investment in mid Wales? A growth deal for mid Wales or north Wales—we have to understand what it is, what we need to work with. It's part of something that I think we need to understand. This Welsh Government, I hope they look at the financial transaction capital. It's an awkward tool, but if we can make that work for investment in things like electric vehicles, where there's a payback and you can use the loans, as well as retrofitting on warm homes, if it can be used to support our rural communities facing the challenges of Brexit—there, I have said the B word—then let's use that. Let's be creative about that. But, before we celebrate what the mid Wales growth deal might be, let's understand what it is and what it really will try and achieve.

I agree with Nick Ramsay. I think we should all cheer up. I think Adam Price looked a little too much on the negative forecast that we had from the Office for Budget Responsibility. The Plaid motion refers to the UK Government budget announcement of downward revisions for economic growth and productivity. But, of course, it's the independent OBR that's come up with those changes to its economic forecast, and I think the Chancellor in his budget speech was rather more optimistic as to what was going to be happening to productivity and growth in the UK.

We should, I think, look at what's been happening to the deficit this year. It's been falling quite a lot faster than had been expected. The only reason that isn't projected to continue is, having projected for the last 10 years that productivity was going to go back to its previous trend, the OBR seems to think, 'Oh, we haven't quite been right on that for the last 10 years, so let's change it and assume, actually, it's not going to be very good at all.' And I fear the OBR is making this change to its forecast at the wrong time in the economic cycle, and, just as it's been wrong over productivity shooting up over the last 10 years, it's going to be wrong now in thinking the outlook is going to be as poor as it suggests. And I say that for four reasons. Firstly, productivity has actually shot up quite significantly, just on the latest numbers. The OBR signalled, I think a month or two ago, that it was going to be revising down its estimates, and has continued with that, notwithstanding, at least—I don't want to put too much emphasis on one quarter's data, but it was a very sharp rise we saw in the third quarter. And, if we do see that continue, even for another quarter or two, it will make it very difficult to get to the OBR's numbers for the next year or two.

I'd also emphasise that, for the last 10 years, we've had very, very strong employment growth, which, in many ways, is to be welcomed. But it's also been associated with record levels of immigration. And, at the same time, we've seen a shift in the employment base, with growth being highest in some low-wage and relatively low-productivity sectors as we had large numbers of people come to the country, often from the non-EU, with certain skills tests for some of the areas of immigration, but, for the EU migration, without a requirement for a minimal skill level, and, very often, people with very good qualifications, actually, in their home countries coming but then working in industries where they're not applying those qualifications, in quite low-skilled areas with relatively low wages and low productivity.

We've already begun to see those record rates of immigration begin to fall, and as we—post B word again—are likely to have at least some restrictions on the level of immigration that we haven't had before from the EU, we wouldn't expect to see that large increase in relatively unskilled jobs that have, in large amount, been met by higher levels of immigration coming into the country.

So, usually, as you get—in the latter part of an economic cycle, you begin to see wages rise as unemployment comes down. We haven't seen that, and at least one key reason we haven't seen that is that we have had very high rates of immigration, with people coming in from countries where wage rates were a lot lower than they are here. As that comes to an end, we would expect to see more of our growth rate made up by productivity and less by that employment growth driven by migration.

We also have seen very, very low interest rates now for coming up to 10 years, and one thing that interest rates usually do is they prevent companies that aren't returning above that interest rate and their capital from expanding, or, in many cases, continuing in business. And in an economy where workers move from one company or one sector to another—as companies that aren't doing terribly well, aren't growing their productivity very, very, quickly, as they don't expand or, in some cases, go out of business, workers are absorbed into other companies that are showing stronger productivity growth and growing more quickly. And it's really the interest rate that is one of the key drivers of shifting resources into the higher growing and higher productivity companies and parts of the economy. And that hasn't been happening for the last decade as it did before. As we see interest rates rise, I think there's a good prospect we could again see that begin to turn and productivity respond.

Finally, the OBR forecast there'll be no GDP growth at all from net trade, and, given what's happening to the exchange rate, I just don't think that is a plausible position for them to take. I think partly where they and perhaps some other people in a remainer mindset—or it's just a certain way of forecasting—say, 'Leaving the EU is going to make trade a much less open economy and therefore that's not going to lead to productivity', then that pulls through automatically to the numbers because of their assumption. But I don't share that, because I think we'll retain relatively frictionless trade with the EU and we will have free trade deals with other countries. But, even if there were some reduction in trading opportunities with the EU, the fact is we have a huge deficit in goods, and it's the tradeable goods sector where you see the highest growth in productivity rates. So, simply the effect of the import substitution of our producing more of those goods at home would greatly outweigh the productivity impact on the other side.

For all those reasons, I think the OBR has got this wrong. We're going to see stronger productivity growth and, over time, the opportunity for greater Government spending or reduced Government taxes, compared to as set out. 

There's agreement amongst most of us in this Chamber that the public sector pay cap is beyond its sell-by date. Now, in recent years we've seen a deliberate strategy rolled out of pitting public sector workers against private sector workers, and while I'm speaking to the Plaid Cymru amendment on lifting the public sector pay cap, I want to recognise from the outset that there is a real need in this country for better private sector wages, for better skills and for more career opportunities in the productive economy. But, at the same time, Plaid Cymru wants to see the unjust public sector pay cap brought to an end, starting in the Welsh NHS. Doing that would release money into the economy, it would help workers and their families deal with inflation, something which is hitting Wales harder than most other parts of the UK, and it would help with recruitment, retention and morale in Welsh public services.  

We can't avoid the perception that wages at the top of public services haven't been subject to the same restraint as the rank-and-file workforce. It's a perception created by the fact that many senior posts have had their pay determined through separate arrangements outside of the pay review bodies, and often outside of UK Government policy. And, of course, it makes people feel as though we aren't all in this together. 

Today's Plaid Cymru amendment comes at a crucial time following the UK budget. I want to be clear about the implications for Wales. The Chancellor has refused to lift the pay cap in full, but will give Secretaries of State permission to lift the pay cap on a departmental basis if the independent pay review bodies agree. This is what he announced. The Treasury note on public sector pay accompanying last week's budget also makes it clear that pay in this case is devolved. It says,

'For most workforces, pay is the responsibility of devolved Governments in Scotland, Wales and Northern Ireland'. 

The Finance Secretary in the Welsh Government is waiting for the pay cap to be lifted in full so that he receives the Barnett consequential funding. The hope is that this can happen with the NHS if the NHS pay review body recommends it, but the UK Government also says that they will impose a condition of productivity. So, the Welsh Government's approach is linked to a UK Government condition being imposed on an apparently independent pay award that will then be decided by Jeremy Hunt. 

Plaid Cymru proposes that the Welsh Government should have already lifted the public sector pay cap in the NHS. The Welsh manifesto in 2017 made this commitment on page 65, in a chapter dealing with NHS staff. That chapter mentions a host of devolved issues from the living wage through to nurse staffing levels and GP training. The idea that one of those pledges can be carved out as non-devolved without that being specified means that the promise cannot actually be delivered, even though all of the pledges that are listed—every single one of them—are within devolved competence. 

The cost of an NHS pay rise of 2.3 per cent would be an additional £40 million. Now, the Government has already committed to 1 per cent, so that £40 million is the additional cost. Now, I accept that resources are strained. I would accept, for example, that local government simply cannot afford to do this. Austerity is very real. But while it shouldn't be up to the opposition parties to say how the Government should pay for its own promises, there are options available to the Labour Government if the Chancellor doesn't lift the pay cap. 

The Welsh Government has £100 million in reserves, kept aside for possible efficiency savings. There's also £68 million in resource funding through the Barnett formula in the coming years. A Plaid Cymru government would have saved £40 million through reforming NHS agency work, creating a non-profit medical staff agency. The fact that the Labour Welsh Government hasn't taken any of these steps isn't Plaid Cymru's problem; it's your own fault and you need to take responsibility.

So, when it comes to lifting or keeping the pay cap, there are two courses of action that the Labour Welsh Government can announce today—

Will you take an intervention?

—either the pay cap is lifted or an explanation can be made as to why the manifesto was misleading. Only one of those answers would enable Wales to join Scotland as a devolved nation that has lifted the public sector pay cap. The other will leave our nurses and front-line NHS staff facing real-terms cuts to their wages. 

I'm out of time. With your permission, Presiding Officer, I'll take an intervention.

Oh, she is taking one.

Just for clarity, as a matter of principle are you for or against regional pay?

I'm for us here being able to adequately pay our public sector workers and I am for this Government delivering on its manifesto pledges. So, yes, we are for pay being decided here for Welsh public sector workers.

I call on the Cabinet Secretary for Finance, Mark Drakeford.

Thank you very much, Llywydd. First of all, I'd like to welcome the opportunity to respond to this debate on the UK budget announced last week. Before turning to some specific aspects of the budget and what it will mean for Wales, I want to say a few words about the bigger picture. The austerity policy of Westminster is not working, as people across the Chamber have recognised. It is damaging the UK economy as a whole.

By 2022, Llywydd, it is estimated that the economy of the United Kingdom will be £41 billion smaller than in the OBR's last estimates back in March. That is practically the production of the whole of the Welsh economy disappeared in six months in the way that the UK economy has been managed. 

I don't want to repeat a great deal of what has been said around the Chamber. There's a good deal of agreement amongst many of the contributors. Indeed, Adam Price spoke for eight minutes and 47 seconds before he said anything with which I could take any exception at all. Even then, it was more of a nuance than a disagreement. What we've heard is the truth of the impact of austerity on living standards here in Wales. The economy is going through its biggest crisis of our lifetimes as far as living standards are concerned. The Resolution Foundation estimating that average pay will not recover to its pre-crisis levels until 2025, a full 17 years after that began and with all the lost opportunities in the meantime.

On productivity, as you've heard, the OBR has repeatedly revised productivity prospects down since the year 2010. Last week's revision was the largest yet, yet no-one should be surprised that deliberate suppression of wage levels leads to a collapse in productivity. Adam suggested that we may be at the limit of labour-induced growth in the economy, but that is surely, certainly, the case when the share in the UK economy taken by labour is falling at the same time. That's the point that Jane Hutt made about the way that rising inequality combines with wage suppression to have its impact both on productivity prospects and on growth as well. So, here we have an economy that the OBR says will fall in its potential to grow in every year of the coming period, down to a level where we are so far below trend growth that the economy is barely self-sustaining.

We had two very different analyses, I felt, from our Conservative contributors here this afternoon. We had the 'I say, "Buck up"' school of economics offered to us by Mark Reckless—if we all just pulled our socks up and sang a bit louder, things would be a lot better. I enjoyed more, I think, Nick Ramsay's contribution—more biblical in its tone, I thought, in approach to the future of the economy, which offered us to,

'Lead, kindly Light, amid the encircling gloom'.

At least he was willing to offer us a way forward. His slogan for the next election—the Conservative Party's next election—'Vote Conservative; not the best thing since sliced bread', I thought was a slogan that even those who advised Mrs May might have thought twice about adopting, but it's a contribution to political—

Will you give way?

Yes, go on.

What I actually said was that the UK Government would not describe itself as the best thing since sliced bread because I was pointing out that they're modest.

I genuinely hadn't realised, Nick, that that was the import of your remark. I think the slogan works very well and I hope that it'll be very seriously considered amongst those set in authority over you. [Laughter.]

Look, we have said time and time again that austerity is a flawed and failed policy. The most obvious tool the Chancellor had at his disposal to boost both demand and supply is public investment. Interest rates are at this historic low. Now really was the opportunity to put right the deliberate real-terms reduction of more than 30 per cent in UK investment that this UK Government carried out between 2010 and 2017.

I wrote to the Chief Secretary to the Treasury—head of the UK budget—urging the UK Government to listen to the IMF and the OECD and members, indeed, of its own Cabinet and to invest in infrastructure. Like many other people here, I detailed specific projects like the Swansea bay tidal lagoon, which both Mike Hedges and Simon Thomas set out the case for so clearly this afternoon. I asked them to reverse their decision to cancel the electrification of the main line between Swansea and Cardiff and to commit to investment in key transport projects in north Wales.

The UK budget failed Wales on all these fronts—'Nothing in it for Wales', as Adam Price began this debate.

Will you give way?

Yes, Mark.

Clearly in the context of north Wales and the budget, at the end of September, the chief executives and leaders of all the six north Wales councils wrote to each council, inviting them to participate in a committee to develop the growth bid to go to the UK Government. Surely, as a Government Minister, you appreciate that governments can't respond to things until they've received them.

Llywydd, there are a small number of things in the budget that I do want to welcome, so I'll do that now. I welcome the fact that, in terms of the fiscal framework, we are beginning to see the emerging impact of the fiscal framework in this budget. I welcome the fact that there is a commitment to north Wales and mid Wales growth deals.  I welcome the fact that there's an industrial strategy to go alongside it, albeit with the limitations that others have pointed out this afternoon.

But what the real story of the budget is is that it goes on creating the context in which austerity rolls on into the future, blighting the prospects of so many families and communities and corroding the ability of our public services to carry out the work that is so important in the lives of Welsh citizens. I thought Siân Gwenllian captured very well the human cost of austerity—the way that it works itself into the lives of individuals and of children here in Wales and casts such a shadow over their futures. That's the context in which we are operating, despite the small things that we are able to welcome.

Let me say something about the specifics of the budget to you. You've heard about the £1.2 billion that we apparently have. Financial transaction capital makes up more than half of that. Yes, we want to be creative in the way that we use it, and we will do our very best to put it to good use, but let's be clear: financial transaction capital comes for purposes identified by the UK Government with rules set by the Treasury and has to be handed back to the Treasury when we've made that use of it. It is not money in the sense that we are normally able to deploy it for Welsh purposes into Welsh priorities in ways that this Assembly is able to take a leading part in shaping.

Nonetheless, we will do our very best to make the most we can of those parts of the budget that are in our hands. There is £215 million in revenue for everything that we want to do for public services in Wales for all of the four years. There is £350 million in conventional capital over the same period. Joyce Watson said, and she was absolutely right, that, before this budget, our Welsh budget would be 7 per cent lower in real terms in 2018-19 compared to a decade ago, and this budget leaves our budget 7 per cent lower than it was a decade ago. In other words, it doesn't move the dial on the reductions by even 1 per cent.

Our job in the Welsh Government is still, though, to use all of the opportunities that come our way. We will certainly do that. There will be opportunities next week, Llywydd, when we are able to show some of the plans that we will be developing in discussions with others to use those new opportunities. I look forward to hearing them discussed further in this Assembly.

For today, the Government's amendments simply seek to put the record straight on two points within the motion. We hope you'll be willing to support those amendments, and then we will be pleased to vote for that amended motion.

I call Adam Price to reply to the debate.

I think this debate has been very useful in that it has pointed up some of the dividing lines on the economic policy questions of our time. Clearly, we have the various versions of the irrational optimism that we heard on the opposite benches. We can quote any number of think tanks. The IFS was quoted on the Tory benches. The IFS is saying that we won't return to the pre-crisis level of national debt as a proportion of income until the 2060s. Productivity is at its worst level in terms of its trend since the early 1800s. How much pessimism are you going to deny? The figures speak for themselves, quite frankly. If you think the OBR is unduly negative, the OECD has got an even lower forecast. Morgan Stanley—scions of the capitalist system—they're about half the level that the OBR are forecasting for 2019. That's the reality, the economic reality that we're facing.

There are other dividing lines. It's an interesting time that we are living in when Andy Haldane from the Bank of England says that the question of our time is labour's share in the economy, almost sounding like an old-school Marxian economist. That is the fundamental question. Globally, labour's share in the economy is falling, and that's why I would appeal to those on the Labour benches. You need to focus on this question. Obviously, we're not going to be able to solve this problem ourselves alone—we're not arguing that—but there's a leadership opportunity for us in Wales here. The question of the falling share of wages in the economy has to be addressed, and you could actually catalyse that wider debate, as the Scottish Government are doing, by looking at how we can raise the cap here in Wales. There are some practical suggestions—others are available—about how that could be done. I do urge you on the Labour benches to look again at this question. [Interruption.] Yes, certainly. 

Would you agree, as the leader of Plaid Cymru has already stated, that it's good use of public money to use reserves to fund ongoing pay rises?

I honestly think that this question, this political question, which is at the centre of global economic policy at the moment, is so important that we have to find a way. Wales has to lead on this question. We cannot be at the sidelines, using excuses. We have to show moral leadership, and we have to find a practical way of doing it in a way that, as much as possible, protects our public services. So, I do urge Labour Members to look at this question again.

Also, to echo some of the other contributions that were made from my own benches, and, indeed, by Caroline Jones as well, in these difficult times, in these difficult political and economic times, we have to show a sense of agency here. We can't just hope for Corbynomics. We need a better Carwynomics. Rather than just talking about nationalising a UK energy company, why aren't we setting up our own publicly owned energy company in Wales, so that we can use those few pots of money that are available there at the UK Government level to actually—[Interruption.] Well, if the First Minister wants to intervene on me, then he can. We need to be smarter in these difficult times. There are good ideas on some of his back benches. There are good ideas out there in wider civil society. We are facing the most difficult challenge economically that we have faced in a generation, and we have to be much more intelligent and much more innovative than we've been to date.  

The proposal is to agree the motion without amendment. Does any Member object? [Obection.] I will defer voting on this item until voting time.

Voting deferred until voting time.