Item 4 on the agenda this afternoon is a statement by the Minister for Finance and Trefnydd on the future outlook for public spending in Wales. I call on the Minister for Finance and Trefnydd, Rebecca Evans. 

Dirprwy Lywydd, there is little doubt that Wales and the public services we value so highly face major challenges as we look to the future. It seems the sole focus for the UK Government is the election of a new leader of the Conservative Party and, as a result, a new Prime Minister. We have all heard both candidates make big promises on tax and spending. But, as things stand, we know very little for certain about what fiscal policy a new Prime Minister—and almost certainly a new Chancellor—will pursue. On top of the escalating uncertainty around Brexit, this lack of clarity around the UK’s fiscal prospects creates an unprecedented challenge for us in developing spending plans for the future. In spite of this, I am committed to sharing as much information as possible with stakeholders to inform their future planning.  

At this point, Wales faces the twin threats of the UK Government’s continuing programme of austerity and a 'no deal' Brexit, which could do great harm to Wales's interests. We are now in the ninth year of austerity and Wales is suffering the consequences of damaging Tory policies. We have long maintained that continuing with austerity is a political choice. It is a fact that, in spite of sluggish growth, tax receipts more than cover current public spending. What have we got to show for almost a decade of austerity? UK productivity is barely above pre-recession levels and pay, adjusted for inflation, still remains below 2010 levels. Growth in tax receipts has been sluggish, reducing resources to fund public services. In Wales, if spending on public services had kept pace with growth in GDP since 2010-11, this year the Welsh Government would have an additional £4 billion to spend. To put that into perspective, it would increase our budget by nearly 25 per cent.  

The UK Government’s narrative has been that austerity is ending. The reality is very different. Even taking into account announced increases to health spending, real-terms spending on public services per head across the UK will be some 10 per cent lower in 2023-24 than in 2009-10. Make no mistake, the UK remains firmly in the grip of austerity. The Welsh Government has made very clear that health will continue to be our priority for available funding. But the stark reality is that, unless the UK Government takes steps to end austerity, protecting health will mean very, very tough choices for other vital areas of public services.

Based on the Office for Budget Responsibility’s published figures for the spring statement in March this year, we estimate that, if the Wales resource budget increases in line with UK resource departmental expenditure limits and NHS growth in England is matched in Wales, then the rest of the Wales budget would fall by around 1 per cent in real terms between 2019-20 and 2020-21. This would heap further pressure on our hard-pressed public services, which are still facing rising inflation and unfunded pay and pension costs.

But the frightening reality is that the public spending context could get even worse. It's worth remembering that the spring statement forecasts assume a relatively benign Brexit. Unbelievably, we still have no clarity about how the UK will leave the EU and what the future holds. The next few years will crucially depend on the form of any Brexit deal and any transitional arrangements. And that, of course, assumes that there will be a Brexit deal.

Wales receives some £680 million annually from EU funds, and the Welsh Government has made it clear that we will look to the Treasury to maintain our spending at current levels post Brexit. At present, the consultation on the proposed UK Government shared prosperity fund, which threatens to sweep power away from Wales, has not even opened. We will continue to hold the UK Government to the promise that we will not be a penny worse off. Our message is clear: not a penny less, not a power lost.

We are already seeing the impact of Brexit uncertainty on our economy. The Office for Budget Responsibility, the Bank of England, the Organisation for Economic Co-operation and Development and the International Monetary Fund have all highlighted that Brexit uncertainty has pushed the economy onto an even lower growth path. Business investment decreased in each quarter last year—an unprecedented development outside of a recession. GDP decreased by 0.4 per cent in April compared with March. A disorderly Brexit would risk recession in the short term.

The Office for Budget Responsibility has also noted that the losses of tax revenue due to slower growth are more than offsetting any savings that result from reduced contributions to the EU budget. This damage is not only a matter of abstract economic statistics. The UK Government’s own analysis suggests that each person in Wales could be well over £1,000 per head worse off than otherwise each year over the long term. This will be reflected in lower pay, worse job prospects and poorer public services as a result of weaker tax revenues. This uncertainty is damaging the economy and directly impacting our ability to plan and provide the longer term certainty for the Welsh public services that people rely on. We start this year with our current revenue settlement not extending beyond the current year, 2019-20, and a capital budget only until 2020-21. Based on current policy, we can only assume that the net impact of growth in devolved tax revenues and growth in the block grant adjustment between 2019-20 and 2020-21 will not have a substantial effect on growth in the overall Welsh Government budgetary position between the two years.

Public sector pay makes up around 50 per cent of the Welsh Government's spending. So, developments that impact on public sector pay bills are key when developing spending plans. The UK Government’s policy of austerity has resulted in a long period of restraint in public sector pay since 2010. While this has helped mitigate some of the worst impacts of austerity, we think that public servants should be properly rewarded for the important and difficult work that they do. Having seen the UK Government agree the teachers’ pay and the three-year NHS 'Agenda for Change' pay deals, we now expect that pay per head will rise more quickly over the next few years, but this will also mean an increasing pay bill. Coupled with increased pension costs at a time when budgets are not rising, meeting these costs will prove particularly difficult.

Having confidently stated that it would set budgets for three years through a comprehensive spending review, the UK Government is now indicating that because of the chaos it has created it is increasingly likely at this stage it will be forced instead to play for time and roll forward revenue plans for one year only. We've always sought to provide the earliest possible certainty on budgets to our partners. I've now written to the Chairs of the business and finance committees signalling that this uncertainty has left us with no choice but to plan on the basis that we will publish a draft budget on 10 December and the final budget on 3 March. While this might be the normal budget timetable in Scotland, I'm aware of the impact that this timetable will have on the Assembly and our partners. It remains possible that the UK Government could publish an earlier budget, and in that scenario, I'll be looking to bring forward our budget timetable as much as possible, and I'm grateful for the Business Committee’s support with this.

We're determined to maximise the impact of the resources we have. We're focusing our budget preparations on our eight priority areas of early years, social care, housing, skills and employability, better mental health, decarbonisation, poverty and biodiversity. These priority areas are integrating activity across Government in the areas where we can have the greatest impact over the long term. As part of this work, I'll be undertaking visits over the summer in relation to these areas to gain an insight of the challenges and the opportunities that wider partners see in each of these eight areas. So, in closing, our Government remains committed to doing everything it can to meet the very real challenges we face today and in the future.

I must say, I'm not entirely sure where to start with this statement today. In his previous contribution to the previous statement, the Minister emeritus, Alun Davies—. I'm not sure whether you're going to contribute to this statement, Alun, but you mentioned that you were looking forward to hearing some spending commitments. I'm not sure we really did hear much about any Welsh Government spending commitments in this statement, but then it did follow on from the previous statement about priorities. 

The silly season has clearly started early this year. All I can say is that it's disappointing that this statement lacks the Minister's normally constructive tone with her normally positive overtones. This statement was more about UK Government bashing rather than putting forward that positive Welsh Government vision that we all in this Chamber would like to see, that public services and those working in public services across Wales would like to see, and, of course, the public would like to see. I think that this, in that regard, is an opportunity that's been missed. In fact, it wasn't until halfway through the statement—I do thank the Minister for giving me sight of the statement in advance—but it wasn't until halfway through the statement that we got on to EU structural funds, which have been so important to the Welsh economy over so many years. Indeed, it was only at the end of your speech that you did actually then touch on priorities, but only in a very general sense as you spoke about going out to stakeholders. As for,

'Our message is clear: not a penny less, not a power lost', well, it does sound a little bit like a Jeffrey Archer novel, but I would say that I do actually agree with the sentiment myself. I think many AMs here would agree that we don't want to see a penny lost, and we've made that statement over a number of months now, and years. But I think that the message was sadly lost in some of the wider UK Government bashing that occurred. 

Yes, of course, we recognise that the Welsh Government faces challenges and the UK Government is far from blameless in all of this, but rather than constantly blaming the UK Government for the nine years of austerity, Minister, have you considered laying at least some of the blame at the door of the previous UK Labour Government that built up the debts far too fast and went far too far in building up those debts? And perhaps—I used to say this to the previous finance Minister—perhaps if the Welsh Government had been running things then instead of your Labour cousins in Westminster, we might have been in a slightly better position. I'll give you the benefit of the doubt. Unfortunately, you weren't, and we do now see the result of that profligacy at that time.

Turning to some of the detail that was there on the Office for Budget Responsibility's published figures for the spring statement, you said,

'if the Wales resource budget increases in line with UK resource departmental expenditure limits and NHS growth in England is matched in Wales, then the rest of the Wales budget would fall by around 1 per cent in real terms between 2019-20 and 2020-21.'

Is that a coded way of saying that Welsh Government has no intention of matching funding increases with the NHS in England? Because if that is the case—and I recognise you say, as well, it would cause reductions elsewhere in other budgets—but if that is the case, then I think we need to be upfront with the public that the NHS budget in Wales is not being protected in the way that some people think it might be, and protection, indeed, that the Welsh Conservatives argued for back in 2011, which didn't happen back then in real terms. It happened in cash terms, not in real terms, and I think that we are still playing catch-up here in Wales from the mistakes that were made back then.

On the budget timetable, I fully agree with the Minister that three-year budgets set through a comprehensive spending review are desirable, and it's a shame that the UK Government doesn't feel able to introduce them at this point. I would point out that it was this UK Government that at least aspired to do so. And as the Welsh Government knows, and we know on the Finance Committee, three-year budgets are not easy to achieve. I would ask you: are you confident that you are delivering the sort of medium-term stability that public services in Wales are crying out for, and are you hopeful to move to commit to three-year budgets?

You finally mentioned Welsh Government priorities at the end of your contribution. I wonder if you could give us some more details on that, also on your planned visits that you mentioned over the summer. It does remind me a little of the former finance Minister Jane Hutt's budget tour. Alun Davies remembers, and this emeritus remembers the budget tour of a number of years ago, where she went out and visited stakeholders in different corners of Wales—a very comprehensive tour, actually. I remember her coming to my—I think she went everywhere, actually, but Jane Hutt, as you know, is very diligent in that respect. Is it your intention to re-invoke the spirit of that tour? Which stakeholders do you intend to meet with? Will it be, to coin a phrase, 'the usual suspects' or are you actually intending to go out and maybe take some evidence from stakeholders who aren't normally engaged with, so that we would see over the months ahead something that I think all AMs here would like to see, which is a budget that genuinely reflects not just the interests of Assembly Members here, but the interests of the people of Wales and is beneficial, indeed, to the future economy of Wales?

Thank you. I'm pleased to have the opportunity to respond to those comments. There weren't spending commitments made in this statement today because the purpose of it wasn't to make spending commitments, it was to outline the outlook for future public spending in Wales in advance, then, of coming forward with commitments within the envelope that we will have. I think it's really important to have these opportunities to set out the situation because I think it is time for a reality check in terms of the difficulties that we're facing. So, there was no good news in the statement; it was a series of facts that are quite unpalatable to many of us, but they do reflect the situation as to where we are.

On a like-for-like basis, the Welsh Government's budget now is 5 per cent lower in real terms than it was in 2010-11. This is a political choice; this is a choice the UK Government has made in terms of austerity, and I think that we're more than within our rights to point that out. So, when people ask me, 'Can we have extra funding for x, y and z?', I need to know where it's coming from because we can't have a balanced conversation that doesn't involve that.

But then looking forward, we're looking in extremely difficult times: the Office for Budget Responsibility forecasts prepared for the spring statement showed growth will continue to disappoint for the next five years. GDP per head is expected to increase at an average annual rate of 1 per cent compared to a long-term average rate of 2.4 per cent. The Bank of England has provided an updated forecast for the economy in May that focuses more on the near-term look, and that says that, over the next 12 months, we expect only modest growth in GDP of 1.5 per cent. And both of these do so in the context of modelling for an orderly Brexit, so I think that we really need to get a good grasp on just how serious this situation is and the level of difficult decisions that are facing us.

In terms of stability, I would absolutely love to provide organisations with stability. I've met with the third sector network and I meet regularly, with my colleague Julie James, with the finance sub-group of local government and we would dearly love to provide some kind of certainty to those organisations, but unfortunately, all we have is uncertainty at the moment. So, we don't have a budget for next year. I've had to, as I said in my statement, write to the Chairs of Business Committee and Finance Committee signalling that we have no choice but to publish a draft budget on 10 December and the final budget on 3 March—circumstances as they are. And those are the very latest dates that we can do so and Standing Orders do require me to notify the Finance Committee as to when we would publish those documents.

I think, moving forward, some kind of certainty from the UK Government would be very welcome, but I am becoming more and more convinced that we will be looking at a rollover budget for next year. Both of the candidates for Prime Minister suggested that they could bring forward a budget in September, so we would look with interest at that. Whether or not that would be a budget that gives us some certainty for the longer term, or whether it would just be a kind of election budget with some giveaways for high tax earners, as I think some of the candidates had suggested, remains to be seen, but whether it would be of any use to Wales in the context of ending austerity is very unlikely. 

I don't share Nick Ramsay's jovial outlook, at the moment, I have to say; I think austerity is causing all sorts of problems and untold damage to individuals and communities, and the erosion of support and services to people across Wales, and, of course, there's not much prospect of change in that respect. Only in May, Paul Johnson, the Institute for Fiscal Studies director wrote in a report, and I quote:

'Leaving the EU would most likely increase borrowing by between £20 and £40 billion in 2019-20. Getting to budget balance from there...would require an additional year or two of austerity at current rates of spending cuts.'

So, prospects aren't as good, maybe, as some people would wish they were. And, of course, we can add to that the concerns as to whether Wales will be receiving replacement funding from the UK Government for what we're currently in receipt of. I mean, they made promises around the pensions issue, which was highlighted to be misleading, because we didn't get the money at the end of the day. So, there are real concerns, but, of course, I don't want to hear from the Minister what the problems are; I know what the problems are. What I want to know is what are you doing to address and tackle some of those issues. So, what negotiations are you having with the UK Government in relation to future funding? We know the ambiguity or the evasion around committing to the shared prosperity fund. Well, what are you pursuing, therefore, to ensure that we get some sort of clarity? 

Lesley Griffiths, the rural affairs Minister, told us only a couple of weeks ago that she had no idea how much money she was going to get, if any money at all, if there was a 'no deal' Brexit. So, we just need assurance from you, as Minister, that you are leading the charge from the front and not just shrugging your shoulders and saying, 'Well, we don't really know what's going to happen and it's all doom and gloom.' I think we need to hear that, actually, you are taking the fight to the UK Government.

Now, Boris Johnson's recent comments around what he would like to do with money being spent in Wales is also cause for concern, of course, and I'd like to know what you're doing to ensure that any UK Government infrastructure spend is actually complementary to Welsh priorities, because there is a danger that we end up with some sort of incoherent financial posturing between the Welsh Government and the UK Government trying to outdo each other without it being joined up, really, and we need to make sure that you do work coherently in order that we get the best bang for our buck.

Focusing on the Welsh Government plans to release its own budget, of course, we were hoping to see a bit more of a definitive shift in terms of responding to the climate emergency in the supplementary budget published previously. I understand it's a tidying-up exercise, is what people tell us, so I am hoping that the next budget that will appear at some point in the autumn will show a palpable shift in terms of resources to address the climate emergency. We haven't seen any costings to the Government's low-carbon delivery plan, of course. I'm just wondering, given that the future generations commissioner did some work on last year's budget that identified that only 1 per cent of that budget was actually earmarked for direct action to tackle climate change, whether we will see, as I say, that palpable shift in terms of resources towards decarbonisation as well. I'd like to hear from you what your plans are in that respect.

I also want to ask about multi-annual budgets. I know that the Welsh Government isn't afforded that luxury by the UK Government at this moment in time, but, of course, we do see in Scotland the Government there include aspects of multi-annual budgets in their budgets. Most recently, they included multi-year allocations for early learning and childcare and digital connectivity, so I'd like to know whether the Welsh Government will be incorporating elements of multi-annual budgeting in your next budget, despite, of course, doing that in very difficult circumstances.

Finally, you say in your statement that health will continue to be your priority for funding. Well, what I want to know is how will your budget further pursue a preventative approach, because, again, the future generations commissioner has highlighted how 94 per cent of NHS spending in Wales goes on acute and tertiary services. So, are we going to see that starting to change as you put that greater emphasis that you tell us you want to put on the preventative approach?

Of course, the ultimate preventative approach, I suppose, is to invest more in education, ensuring that our children and young people grow up being more aware of the importance of their own well-being, healthier lifestyles, being socially responsible citizens, understanding what environmental impact their actions might have. So, when will the Welsh Government confront the funding crisis in our schools, and will you ensure that schools have the resources they need to be able to deliver those outcomes that we all want to see?

I thank Llyr Gruffydd for those comments. The first point he made was: are we taking the fight to the UK Government? Well, yes, I took the fight to the Prime Minister just last week. I was representing Welsh Government on the EUExTP meeting, which is the European Union exit and trade preparedness committee, which is a sub-committee of the UK Cabinet, which Welsh Government and the devolved administrations have the ability to go along to. So, I made the points at those meetings that, actually, we have not had a conversation yet in terms of what funding might be forthcoming for Wales in the event of a 'no deal' Brexit. I made the point that it is extremely unsatisfactory that we are facing the genuine prospect of a 'no deal' Brexit without having had those conversations or any certainty from the UK Government there. So, the UK Government is not confused about Welsh Government's position in those respects.

Of course, we always attend these meetings and make the case for Wales across the piece. The shared prosperity fund, for example, I've taken that case up again with James Brokenshire after the unanimous vote that we had here in the Assembly where we all supported the motion, which was jointly tabled by three of our parties, which said that we didn't want a penny less, that we had to make sure that the shared prosperity fund wasn't an opportunity to roll back on the devolution settlement, and that decisions on that fund should be made here in Wales. Some work has gone on over the last 18 months that would set out very clearly what Welsh Government's priorities would be for the future of regional funding, so we would be looking at multi-year frameworks, we'd be looking at the greater opportunity for local communities to have a say in the direction of the decisions that are made around those regional funds. So, we've been very clear in the documents that we've published and the work that Huw Irranca-Davies has been undertaking in the group that is looking at the future of regional funding in Wales as well.

In terms of Boris Johnson's comments, he said that we wouldn't have less money, so we welcome that, but he also said then that regional funding in Wales post Brexit would benefit from Conservative influence in terms of value for money. Well, of course, the Public Accounts Committee has looked at Conservative influence and value for money, and has looked at one of the funds that it has administered locally, and found that there were no real outcomes to that funding. So, I don't think that we can be taking lessons from the Conservatives on value-for-money issues.

The climate emergency issue is very live and very real for all of us. We're having these discussions now, as we start to consider the preparations of our next budget. But let's not imagine that good work hasn't been going on in this area for years. So, by the end of this current Government term, we expect to have nearly £70 million invested in public sector energy projects, with an expected £650 million in cash savings on energy, and to reduce emissions by 2.5 million tonnes of carbon dioxide over the lifetime of those assets. We're already considering carbon impact when allocating capital funding, and this was a key factor, for example, when we invested £50 million to develop a new rail station in Llanwern, together with extensive park-and-ride facilities and line improvements. And as part of our midpoint review of the Wales infrastructure investment plan, we've provided £60 million over three years for the NHS all-Wales capital programme, including supporting the replacement of the ambulance fleet with more modern, lower carbon models. So, it's not as if we just suddenly woke up one day and realised the environment was important. This has been at the heart of all of this Government's work, and we do recognise that within the context of emergency we need to increase our ambitions and move further forward there.

The preventative agenda—we worked really closely with the well-being of future generations commissioner to agree a definition of 'prevention', which is one that we're using across Government now, and, clearly, we want to see more investment in prevention, because obviously it has savings in the longer term, but that doesn't mean, of course, that we don't have the acute end to meet as well. Good work is going on with the future generations commissioner's office in terms of developing that journey checker that we've been talking about, which shows how we will better embed the future generations Act in all of our budget-making and decision-making processes. And some mention has been made earlier on today about the future generations commissioner's report, where she suggested £1 billion of funding for what she would see as priorities for the next budget. Now, that's a really useful contribution to the discussion, and I look forward to meeting with her to discuss that further. I think that the challenge to the commissioner, and the same challenge I make to all Members and everyone else I have discussions with regarding the budget, is if we're asking for additional funding in one place, then we have to have an understanding as to where we disinvest in response to that. And I'm also keen to understand the exact details of the carbon emissions that we would expect to be saving as a result of those measures in the 10-point plan that the commissioner produced, but I'm looking forward to having those more detailed discussions with her shortly.

I'd like to thank you, Minister, for your statement, which offers us a stark warning of the challenges ahead of us, challenges that are made all the more pressing because of the failed economic policies of the UK Government. I'd welcome your reflections on the dangerous hyperbole that we've seen from the two candidates for the leadership of the Conservative Party. You've alluded to some of this in your answers to other Members, but I'd like to specifically ask you whether you agree with me that the evidence, for example, from the Institute for Fiscal Studies, is that Boris Johnson's offers on income tax and national insurance contributions would actually deliver the greatest benefit for those on the highest of incomes in this society, and do you agree with me, also, that this would see a further slashing of the funding available to public services across the UK, and, of course, here in Wales?

Minister, you have explained to us the high degree of uncertainty around future spending plans, and this uncertainty is clearly made worse by the lack of a comprehensive spending review. With that in mind, how exactly is that affecting the ability of the Welsh Government to plan alongside partners in local government, business and the third sector?

I thank Vikki Howells for raising these points, and particularly the recognition that some of the policies and proposals that have been put forward by both potential new Prime Ministers certainly are not on the progressive end of things, and certainly would benefit those who are richer, and offer nothing for people who are struggling, but then I suppose that is very much where we are in the sense that they're playing to a very narrow gallery. They only need to satisfy the small number of people who are members of the Conservative Party so that they can walk into No. 10. And, clearly, being progressive and trying to introduce policies that will support people who are the hardest pressed, in difficult times, who are bearing the brunt of austerity, is not a priority for them.

We're trying to do some modelling along different paths, looking at things that might happen so that we can get a better understanding of what that means for Wales. So, we're not expecting to know the quantum of our budgets until much later in the year, but we are looking at various scenarios, and they do vary from some favourable conditions to some very stressful ones. And one of the ones that we're modelling is about preparing for a 'no deal' exit from the European Union. In December of last year, we published our latest economic analysis of the UK Government's proposals for EU exit, and that highlighted, in a worst-case scenario, GDP maybe between 7.75 per cent and 10 per cent lower than in May 2016 by the end of 2023, in the event of a disruptive Brexit. This is a more severe contraction than was experienced in the recession that started in 2008. Subsequent analysis from the bank suggests that suitable mitigation preparation could alleviate the worst-case impact somewhat, but it would still be similar in scale to the last recession. So, I can reassure the Member that we are modelling all kinds of possible outcomes, and certainly looking very carefully at the impact that the various promises made by the Conservative prime ministerial candidates might have on Wales.

Vikki Howells is right to identify the fact that we don't have a comprehensive spending review and we don't have a budget for next year as being really at the root of the lack of clarity that we have. So, were we to see a roll-over budget of one year without the additional funding that we've had in year, for example, that would mean, on a like-for-like basis, local authorities would be £111 million worse off on that basis. So, I think the challenges that we're facing are very stark, and the lack of information is just making things difficult.

When I was planning for this week's business, I think it was Friday last week, I was taking a look through some of what we'd be doing and I saw this statement, 'Future Outlook for Public Spending in Wales', and I was quite excited. I thought we were going to be looking at some of the big, long-term issues affecting public spending in Wales: the demography of Wales, our ageing population, the impact of when we lose younger people to England. What can we do to keep more of the younger people generating taxes in our economy, particularly when we've got the Welsh rates of income tax now? Why is our population ageing so much, relative to England? Do we have levers, and would we want to consider using any of those levers to affect, perhaps even at the margin, the demography? What are those challenges? How are Welsh Government preparing for it? But instead, we get this. I mean, what a whinge. We've just had a long litany of complaints, as though, looking forward a decade, we're going back a decade, and it's just a great screed against austerity. We were told that there is a continuing programme of austerity from the UK Government, that the UK Government's narrative has been that austerity is ending, and that the reality is very different. And then you treat us to this comparison between 2023—well, at least that's looking forward. But you go back to 2009-10. I mean, what does that say about whether austerity is ending? Surely, what matters, at least in that respect, is: what's our budget this year compared to last year? How might it be next year compared to this year? Is there a change in trend? Are we actually going to begin having a bit more money again? Yet, all you talk about is austerity, and I just don't think that it's very helpful. [Interruption.] Well, if you'd like to examine my voting record, you'll find that some of them I didn't actually vote for.

But, I mean, let's—. The one good thing if Boris does come in is that, perhaps, there will be some optimism. That's one thing that you can say for him. Whether it will be well grounded or not, we will come to see. You said nothing positive, at least that I recall, in that statement. This morning, have you looked at the economic numbers that came out today? Seventy-six per cent employment across the UK—an absolute record. We've never seen employment on that scale before. And we have wages going up by 3.6 per cent year on year. That's more than we've seen—significantly more than we've seen—for the last decade. In real terms, that 3.6 per cent increase, inflation at 2 per cent—. We're now seeing real wages going up year by year between 1.5 and 2 per cent, yet we're still seeing employment creation on top of that. So, if you look at both employment creation near 1 per cent still, year on year, and that 1.5 to 2 per cent real wage growth on top of that, you could be looking at growth in employment income this coming year of 2.5 to 3 per cent in real terms. Surely that gives the scope for GDP to surprise to the upside compared to some of the gloomiest forecasts that you've been talking about. We've also seen, at least at the UK level—you don't give us the numbers here—some surprises to the upside in terms of how the borrowing numbers have been coming in. One of the key drivers of those borrowing numbers is that employment income. It is hugely important to the tax take, and some of the areas—the only ones you talk about—where the economy's disappointed, for example investment, are ones that are not the big tax-take areas. If you have a certain level of GDP, if you see a shift away from investment towards employment income, at least in the near term the fiscal impact of that is very positive, because you raise more tax from it. We didn't hear anything about that at all, and I have to say I am disappointed by that approach.

You have this Jeffrey Archer sort of title, Nick Ramsay suggested—not a penny less, not a power lost—and, again, you accentuate the downside. You could at least have listened to your First Minister in the previous statement. He was a lot more positive. He said we'll be acquiring thousands of new powers and functions in policy areas that were previously set by EU laws. Surely that is something to celebrate. Clearly there's a discussion with UK Government and others about exactly how the shared prosperity fund will work. Now, Boris has said that the decision to cancel the M4 relief road needs to be reversed, and he's said there's going to be significant Conservative Ministers' influence on how the money is spent, so I infer from that that the UK Government may be offering to pay for the M4 relief road, or at least a substantial proportion of it. Now, surely, given the impact that could have in boosting our economy, helping young people stay in Wales—what better way to boost shared prosperity than actually to fund that M4 relief road?

Isn't it time the Minister started actually looking at the positive, at least some of the positive elements? I'm quite happy to plan for scenarios that are less positive, but the Bank of England numbers she's quoted—they were the worst-case scenario to start with, and they've revised them away because they're preposterous. They are based on the assumption that people don't respond to changes in economic circumstance, whereas they do, and that's what drives human progress. So, let's just have a bit of optimism.

I'm not going to pretend there is good news in terms of Welsh Government's budget, which has been going down year on year. Just three facts from Mark Reckless's contribution—well, one from my statement, and two from his contribution. The fact from my statement is that 50 per cent of the Welsh Government's budget goes on pay. Mark Reckless tells us wages are going up year on year; Welsh Government budget is going down year on year, so I'll leave Mark Reckless to do the maths in terms of what that means for the pressure on Welsh Government and the difficult choices that we have to face.

The chief economist has provided a report, as he will do again this autumn, which we'll publish alongside our draft budget, and he takes the longer look. The latest report contains a range of important conclusions, including that Brexit continues to weigh on growth prospects for Wales and the UK as a whole. The severity of the impact will depend on the form that Brexit takes, and the dislocation associated with the process of leaving, and it's likely that Wales will be disproportionately hit by a hard Brexit. Analysis undertaken by the OBR implies that the assumption of a prolonged period of fiscal restraint should remain at the core, central scenario, and under the lower scenario, which is included in the report, the Welsh Government would only recover to its 2010-11 level by the end of the next decade. So, that takes a longer look, and, again, there's not a lot to be particularly joyous about in that as well. So, I'm sorry if the Member thinks that it's a whinge, but, unfortunately, I'm sharing some facts with colleagues that I think will help us in terms of our deliberations as we set our forthcoming budget.

Thank you, Minister, for your statement, and I remain in no doubt that austerity is a politically motivated camouflage for an ideological attack on the state and public sector by the UK Conservative Government, and I make no apologies for saying that. It is critical to the context and outlook for Wales and the people of Wales, which is the statement that we have just heard. And I'm afraid the Assembly group opposite do belong within the UK Tory family, although they do try and distance themselves from it like a rather weak and wobbly distant relative that they really just don’t want anything to do with on occasion. So, Minister, I’ve heard it said by the Tory benches that I mention austerity a lot, and that is because it does make me angry. I make no apologies for that either. As the Assembly Member for Islwyn, I will continue to mention austerity.

I’m increasingly concerned that the situation, though, is being made a lot worse, as the Minister has said, by the UK Government’s ongoing lack of a comprehensive spending review, the lack of clarity making planning virtually impossible, and that this compounds the impact of the ongoing austerity. It compounds the cuts to Wales, and it does not even countenance the economic crash and harm of a ‘no deal’ Brexit, which seems to be somehow not countenanced by some in this Chamber. So, Minister, can you set out further your view on how the cumulative impact of these constraints are impacting on our ability to act, despite the highly ambitious and innovative programme of legislation?

I thank Rhianon Passmore for setting out the challenging circumstances in which we find ourselves, but I want to emphasise that Welsh Government is doing absolutely everything it possibly can to prepare for Brexit, whichever form it takes, and to try and take whatever mitigating action we possibly can. So, you’ll recall I recently announced a capital investment package, which was a first tranche of a stimulus package worth £85 million: £50 million of that was invested in social housing to support the delivery of up to 650 affordable homes across Wales, which could create employment for up to 1,000 people for a year; £5 million allocated to the maintenance of the Welsh Government’s strategic road network, ensuring well-connected, reliable, resilient road networks in all parts of Wales; and £10 million was allocated to the economy futures fund to support the delivery of the economic action plan, and this additional funding will help boost resilience and sustainability for Welsh businesses and encourage inward investment in a post-Brexit environment. And then there was an additional £20 million for local government capital funding, and we will work closely with our local authority partners to ensure that that funding is deployed in the most impactful way.

So, we're doing everything that we can to support businesses, especially in these times of uncertainty, and we'll shortly be making an announcement of further funding that will be made available through the EU transition fund, which colleagues will recall is a £50 million fund that aims at helping businesses, organisations and society in Wales to transition through the Brexit process. Over £35 million of that has now been allocated, but, as I say, I’ve been having some discussions with colleagues as to how we can best deploy some further funding there. So, Welsh Government's working extremely hard in difficult circumstances to provide as much certainty as we can to business and as much assistance as we can to our communities.

Finally, Alun Davies.

Thank you very much, Deputy Presiding Officer. I must say, this has been a somewhat disappointing statement, Minister. We all know that the UK Government’s austerity policy has been a disaster for Wales—it’s been a disaster for public spending—and we all know that it’s had a human impact on people across this country as well, and people that the Minister and I both represent. However, what we do not know, and, unhappily, we still do not know, is what Welsh Government is going to be doing about this. What is the response of Government? We expect more from Government, and I think we've every right to expect more from Government than simply making faces at the opposition here, the Government in Westminster, and speeches condemning the Tories. Certainly, people in my constituency want to know why are we electing people to come here. We want more than speeches; we want more than resolutions.

I recognise the numbers that she has alluded to this afternoon in terms of Brexit, but that, of course, reinforces the demand and the requirement for action and an approach from Government that goes beyond rhetoric. We know nothing about the evolving tax base. We know nothing about how the Welsh Government is approaching a potential erosion of that tax base. We know nothing about an approach to taxation policy. We know nothing about the Welsh Government’s approach to borrowing. And we know nothing about how the Welsh Government expects to use the Welsh reserve. Public spending now lies here as well as in Westminster, and, as somebody who has campaigned for devolution all his adult life and has campaigned for responsibility to be held in this place and not simply the other end of the M4, it's profoundly disappointing when the Government's response to these challenges is simply to blame someone else somewhere else. We have to take responsibility for these issues here as well. 

Minister, we heard from the First Minister in an earlier statement this afternoon that he does not intend to press ahead with our manifesto commitment on local government reform. So, left with the Redwood model, a pre-devolutionary governance in a country that's changed beyond all recognition, we now have the prospect of spending more administering a system of governance that didn't work when we had more funding available to us during the Blair Governments in London. And this demands more from the Welsh Government. I will want the Welsh Government to seriously consider how, then, in this context, are we going to protect core services. Are we going to say—I use this as an example, Minister—that we're going to fund schools directly, that we will directly fund schools from Welsh Government, or that we will fund schools through the consortia? Because it frightens me that we have a radical reforming agenda for education, but we don't have the funds available to pay teachers or teachers' assistants or support staff within schools in order to deliver the basics.

So, I don't think it's enough in the future to simply blame the Conservative Government in Westminster. I accept completely the arguments over austerity, of course I do; I've made similar speeches to the Minister in the past. But I will say to the Minister that, for the future, when she comes back from her budget tour over the summer, I think this Chamber will expect far more from her than simply an attack on a failing Conservative Government. 

So, I know that Alun Davies would have read with interest the 'Tax policy work plan 2019' that I published in February this year and will have some detailed questions for me on that. And that set out the programme of work and research that the Welsh Government is pursuing in 2019, building on the findings, of course, of last year's work plan. And that policy sets out our main areas of interest and it's there so that organisations and interested individuals can see what we are examining, they can ask questions and contribute their views, knowledge and experiences to inform our thinking. And, of course, when I published that, I did invite everybody to involve themselves with that tax policy work plan.

He'll also be familiar, I'm sure, with the Wales Centre for Public Policy's research that it's done on growing our tax base here in Wales, and that's something that we're very much focused on. Of course, some of the promises made by candidates for the Prime Minister in policies will not help us grow our tax base here in Wales, but our focus is very much linked with our new national development framework, which the Minister for Housing and Local Government will be publishing shortly. And that sets out how we can use the levers at our disposal to ensure that we are encouraging people to come to Wales who are coming here because they're able to do so because they know that Wales is a good place to do business, a good place to set up business, and a good place to create jobs, which will help people maximise their own income potential. 

And we're also working to develop personal learning accounts, for example. This is part of our budget process, which I'm undertaking a gender review of. Those personal learning accounts will be there for individuals who are in relatively low-paid, low-skilled jobs at the moment but really want to move on, want to gain some skills and have ambition to move into higher paid jobs. Those are pilots that we're looking at through the lens of a gender budgeting approach. And that's a new approach for us, which we're learning from Iceland, which has been working for seven years on its gender-budgeting approach, and we're keen to see how we can take that forward in Wales. 

Certainly, I've spoken to the Member before in committee about Welsh Government's approach to borrowing. I look forward to having further discussions in committee tomorrow, where we'll look at capital funding. But, generally, we will always seek to use conventional capital first, including financial transactions capital, because that's the cheapest kind of capital, and then we will look to more innovative funding models, such as the mutual investment model. But I think it's important to take this opportunity, as we go into recess, to really set out the challenges and the seriousness of the situation that we are facing, with a view to having those discussions, both on the budget tour, where I'll be engaging with organisations, but also with fellow Assembly Members. And I'm really keen to know more about the work that the Finance Committee has been doing in its budget round-tables, to hear priorities from the people of Wales through that particular forum. 

Thank you very much, Minister.