Therefore, we move to item 6, which is a statement by the Minister for Finance and Trefnydd on the implications for Wales of the UK Government's 2019 spending round. I call on the Minister for Finance and Trefnydd, Rebecca Evans.

Diolch. I am today providing Members with a further statement on the UK Government’s spending round, the implications for Wales and the actions that we as a Government are taking to respond to the UK Government’s unpredictable approach to public finances. On 4 September, the Chancellor of the Exchequer presented the UK Government’s spending round, setting out its spending plans for 2020-21. Immediately following the Chancellor’s spending round, I provided Members with a written statement during recess outlining an initial response to the key headlines for Wales.

The Chancellor’s announcement was against a backdrop of escalating Brexit uncertainty and evidence of the UK potentially entering another period of recession. In the fortnight since the spending round, we have seen further chaos, uncertainty and mixed messages from the UK Government. The range of scenarios we are now needing to consider include the prospect of publishing our draft budget in a pre-election period. The Chancellor’s announcement provided, for the first time, details of our revenue budget for 2020-21, which will increase by £593 million above the 2019-20 baseline. This represents an increase of 2.3 per cent in real terms. The spending round also includes an increase of £18 million to our capital budget, which had already been set for 2020-21. Our capital budget will be 2.4 per cent higher in real terms than in 2019-20.

On the basis of the Chancellor’s announcement, the Welsh Government’s budget in 2020-21 will still be 2 per cent, or £300 million, lower in real terms than in 2010-11. The additional funding does not even return our spending power to the levels of a decade ago. We have consistently called for the end of the UK Government’s austerity policy and for increased investment in our vital public services. While the Chancellor’s announcement indicates some signs of loosening the purse strings in the short term, it does not make up for nearly a decade of cuts, nor does it come close to providing the sustainable long-term basis on which to plan our public services.

We remain unclear about the UK Government’s plans for an autumn budget. The Office for Budget Responsibility has informed the UK Parliament’s Treasury Committee that it has not been engaged to produce an updated forecast and would normally require 10 weeks’ notice. The UK Government is acting irresponsibly by publishing spending plans at this time based on forecasts from March, which assumed a relatively benign Brexit, and a previous administration’s fiscal policy. Since March, official data has shown that the UK economy contracted in the second quarter and the latest survey data indicates that it remains weak. A smaller economy means lower tax revenues and makes it likely that the UK Government will quickly revert to a policy of austerity.

Indeed, if the Office for Budget Responsibility had produced the timely economic and fiscal forecasts that normally underlie such a statement, the headroom that the Chancellor has exploited may well have proved to be illusory. The spending announcements will add further to borrowing, and the OBR has since stated that the Government’s own fiscal rules and a key Conservative manifesto pledge to deliver balanced budgets by the mid-2020s may well be off course, only adding to the high probability that another round of austerity will be likely in the near future.

We can have no confidence that these spending announcements will be sustainable. We certainly can't rely on the claimed long-term settlements for the NHS and for schools in England and any potential consequential that they might deliver, because the funding implications for these settlements beyond 2020-21 will actually be determined as part of the next comprehensive spending review. The reality is that the Chancellor’s announcement is a pre-election distraction from the UK Government’s management of an increasingly chaotic Brexit.

The Chancellor announced a further £2 billion in 2020-21 for Brexit delivery. We've been clear that the support to address even a proportion of the impact of Brexit cannot be delivered without a much more significant increase in public spending. We will require substantial additional funding and flexibilities to be able to respond meaningfully to the challenge of Brexit, and I pressed this point to the Chief Secretary to the Treasury at a meeting of the finance Ministers’ quadrilateral at the end of August. The answers we've received from the UK Government to date provide no assurance that the funding we would require would be forthcoming.

It is clear that the Prime Minister is prepared to take the UK over the 'no deal' cliff edge. This would have a catastrophic impact on Wales. All the evidence shows that leaving the UK without a deal will produce a severe economic slowdown in the UK and that a prolonged recession is likely. In those circumstances, we know that the economy in Wales is likely to be around 10 per cent smaller in the long term, and this would be reflected in real incomes that, in today’s terms, would be up to £2,000 lower per person than otherwise.

I am deeply concerned that with exit day looming large, the Chancellor was silent on replacement EU funding to support our communities and businesses in Wales. He was unable to provide any kind of assurance that the UK Government will keep the promises of the Prime Minister that we will not receive a penny less than we would have expected within the EU, and that in accordance with the long-standing devolution settlements, we must have autonomy to develop and deliver successor arrangements for EU funding programmes. These are principles which have the full backing of this Assembly.

Despite these changes and unprecedented uncertainty, I am more determined than ever to look positively to the future and support our public services in Wales as best we can. I am now proposing to bring forward our plans and publish the Welsh Government budget earlier—to November—to provide as much certainty as possible to our partners and stakeholders. I am liaising with the business and finance committees to seek their support for this change. I welcome the support that committees have already offered and I hope that these new arrangements will be acceptable.

The Welsh Government budget will be based on the needs of the people of Wales, and we will aim to deliver the fairest possible settlement for Welsh public services. This consistent commitment is borne out by the fact that health and social services spending in Wales continues to be significantly higher than in England, and cuts to local authorities in England have been twice as deep as in Wales.

The Welsh Government has made it very clear that health will continue to be our priority, along with providing local government with the best possible settlement. We remain determined to maximise the impact of the resources we have. In my July statement on the future of public spending, I outlined that our budget preparations have been shaped by our eight priority areas of early years, social care, housing, skills and employability, better mental health, decarbonisation, poverty and biodiversity.

We recognise that these eight areas are the ones that have the greatest potential contribution to make to long-term prosperity and well-being. They reflect the times in people’s lives when they may be most in need of support, and when the right help can have a dramatic effect on their life course. They are priority areas where it has been shown that early intervention—tackling the root causes, rather than treating symptoms—pays dividends. If we are to realise the full potential of the well‑being of future generations Act, then integration and collaboration between activities and services, with an early intervention and people-centred approach, is essential to delivering long-term outcomes.

Our budget will be focused on the areas where we can have the greatest impact over the long term, and will be at the heart of the way Wales will respond to the challenges presented by this spending round.

Can I thank the Minister for her statement today and for the Welsh Government's proposed response to the 2019 spending round? I have to say, having listened to yourself, the Minister, and also the First Minister earlier, there's certainly an air of pessimism, I think, surrounding the speech writing and question writing in the Welsh Government today. Much of what you said I don't think we would disagree with and I don't think a lot of people in Wales would disagree with. We know full well that the last decade has involved cutbacks at the UK level that have fed through to the Welsh Government level. It's not often spoken about any more why we have those cuts, but of course it wasn't due to the Labour Party in this Chamber—it was due to profligate spending by the Labour Party up until 2010 in Westminster, and borrowing as well. So, anyway, that is for another debate, but I think people do sometimes need to be reminded.

You spoke about the uncertainty of Brexit. Of course, all debates have the Brexit angle at the moment, and, again, you are right to say that there are big uncertainties over Brexit and how we're going to exit the European Union and when, but that still leaves you with considerable ability yourself as a Welsh Government to manoeuvre and to plan and to make proposals for spending here that can improve the lives of the people of Wales and that is what we are here for.

Factually, you've stated the good news: the revenue budget will increase by just short of £600 million or 2.3 per cent in real terms above the 2019-20 baseline. And then there's also to be welcomed the £18 million increase in the capital budget, at 2.4 per cent higher in real terms. And the key wording in both of those instances is 'real'. So, these are real-terms increases, a fact that you accept. So, leaving aside the situation a few years ago, we have to recognise—the Welsh Government has to recognise—that this spending review does deliver more money, more real money for Wales over and above what we had before. And you take that in conjunction with the fiscal framework—which is a very good deal, negotiated between members of the Welsh Government and the UK Government, a great example of partnership working there—if you take it in conjunction with that, then over the last year Wales has actually seen a really good improvement in the formula with regard to the changes to the formula that happened and funding increases that mean that Wales can be—can be—in a much better place if the Welsh Government invest the money wisely.

Now, Minister, as I said, the First Minister was rather pessimistic when he said that a lot of these increases hadn't been signed off. Can you tell us what discussions you've had with the UK Government and with the Treasury in terms of these funding commitments? Do you share the First Minister's pessimism that, actually, a lot of this money is words and we're not going to see it here, or are you confident that this money, which you've announced in your statement is coming to Wales, will actually come to Wales? Because that is certainly what we have been promised and what we need to see here. You said that Wales shouldn't be a penny worse off from Brexit, something that was promised to us all back in the referendum campaign, and I think we would all in this Chamber want to agree with that. I certainly would.

You've, indeed, called for an end to austerity for a very long time: I can commend you on that, Minister. You have not veered from that message for as long as I've been questioning you, and, indeed, in your previous roles. We all want to see an end to that, and, as you said, the belt is now slackening. A corner has been turned. So, this should definitely be welcomed. And I'm sure that this hasn't made up for several years of cutbacks made necessary by people in another place, but we are turning that corner. So, what plans do you have for this new money? When will we see the detail of that? The Welsh Government has autonomy to spend it as it wishes aside from the well-known capital and revenue distinctions, which I'm sure Mike Hedges will go into—I can see him writing furiously over there. So, we need to know what the priorities of the Welsh Government will be.

You've mentioned the health service. There is a significant amount of money that the UK Government has promised to the English health service. Can you give a commitment that that money will feed through the system and will help deal with some of the pressures that the Welsh health budget has been under pressure from? It's been crying out to you to help with.

You mentioned education spending. As we know, school funding in Wales has not kept pace with inflation over recent years. Between 2010 and 2019, gross budgeted expenditure rose by 4.4 per cent, but that was actually a 7.9 per cent decrease in real terms. Back to that important word: real. So, what are you doing to arrest this? What are you doing to make sure that over this year and the years to come that that will be altered and that the funding gap, that all-important funding gap between pupils in England and Wales, can be addressed and dealt with? I know statistics aren't the be-all and end-all. I'm sure the education Minister would remind me of that if she was speaking in this statement, and I accept that. But, nonetheless, there is a recognised funding gap there, which I'd like you to address.

We had the customary Brexit cliff-edge discussion. I think my views are quite well-known as I certainly think that we should leave with a deal. I think that that is in the best interests of Wales. I do not want to see the effects on the Welsh economy if we do have a 'no deal' Brexit, and I'm sure that the Minister would agree with that. I think it's a shame that in Westminster, when it was discussed and there was a vote taken on it, that, actually, a lot of Labour Party MPs—not Assembly Members, but MPs—didn't vote for a deal, so we're in the rather upsetting situation that we are at the moment. But I agree with you that I would like to see us leave with an all-important deal.

In terms of the budget, can I welcome the move to bring the Welsh Government budget earlier to November, I think you said? That is certainly to be welcomed. You said you're going to hold discussions with the Finance Committee and with other committees. If you could have those discussions as quickly as possible and set the wheels in motion. We're already in September, so I appreciate the time for these budget lines is often very constrained and, in this case, this will be even tighter, but I think there is merit in us having those discussions as early as possible so we all know where we are and that we can get on with the job of putting that money into public services in Wales where it belongs.

I thank Nick Ramsay for his contribution. Very interesting, the rewriting of history at the very start, confirming, in his view, that it was profligate spending rather than a global economic downturn that affected the economy in the UK, but we'll put that to one side and consider the other questions that were asked.

The first was what kind of engagement we've had with the UK Government in terms of the spending round. So, we had a finance Ministers' quadrilateral at the end of August, where we sought some information. Nothing was forthcoming there, I have to say, but I did push the point, which Nick Ramsay also mentioned, which was that the 'leave' campaign and members of the Conservative Government have been very clear that Wales would not be a penny worse off as a result of Brexit. I made the point that we need to ensure that that promise is honoured, but I was deeply concerned that the Chief Secretary to the Treasury actually said, 'Well, that was a promise of the "leave" campaign; it's not a Conservative Government's promise.' But then the Prime Minister was leading the 'leave' campaign, so I think that we should be holding him to account for that promise. On the day of the spending round, I did have a brief conversation, again, with the Chief Secretary to the Treasury, which is traditional, so that he can inform us of the allocations in advance of any formal statement.

Nick Ramsay accuses myself and the First Minister of being a little downbeat in terms of our approach to this, but I think we have every right to be because, as we've recognised on a like-for-like basis, our budget in 2021 will still be 2 per cent lower, or £3 million lower in real terms, than a decade before. And had the Welsh Government's budget grown in line with the economy since 2010-11, it would be £4 billion pounds higher in 2021. Imagine what we could do with that. And had the Welsh Government's budget grown in line with the long-run trend in public expenditure, it would be £6 billion higher in 2020-21. So, I think that is really, really stark in terms of what we could be achieving and the additional money we could be putting into our myriad challenges and our priorities that we have here in Wales.

We had been promised a comprehensive spending review at the previous finance Ministers' quadrilateral, but unfortunately, that didn't materialise. That's disappointing for several reasons, but one of which is that we really are sympathetic to the calls from our public sector partners who want to be able to budget over a longer period to support their forward financial planning. But this fast-tracked one-year spending round doesn't allow us to give our colleagues in local government and other services the opportunity to do that. And, as I've said, we've got no confidence that this particular spending round will be sustainable, that the announcements that have been made will necessarily materialise, because the First Minister's quite right that any funding will have to be voted through the finance Act in the UK Parliament and, as we can see, the UK Parliament is currently not sitting.

In terms of Nick Ramsay welcoming the fact that we intend to bring the budget forward, as I say, I've already written to the Finance Committee and the Business Committee. We had a conversation about it in the Business Committee this morning and I know the Finance Committee intend to address this issue in their meeting on Thursday. So, I hope that we'll be able to make announcements as soon as possible. But the work on the budget has been going on, really, since—last March I think I first started having conversations with colleagues. We agree our overall strategy in Cabinet in early spring every year, and then a series of bilaterals occur between myself and other Ministers—and we're going through another round of those now—identifying priorities, opportunities and pressures and so on, and those will inform the budget, as will the series of visits that I undertook over the summer and the series of other meetings that I have planned with interested parties in the coming weeks.

I think the budgetary context is changing so much and the chaos that we face is intensifying to such an extent that it’s very difficult to come to any definite conclusions on what the likely impact of the Chancellor’s statement would be. We can't say what the value of the additional £593 million would be, and I use the word 'additional' in quotation marks. It’s very difficult to say what the additional costs will be as a result of the Brexit chaos. We know that billions of pounds in addition have been provided by the UK Government in preparation for Brexit—oh, the irony—but we don't really know what the costs of responding to Brexit will be from the Welsh Government’s coffers. There will be costs, inevitably, of course.

We can't say what the impact on taxation revenue will be. Every piece of evidence suggests that the impact will be negative. The economy could shrink by 10 per cent. And, even if that happens only over a brief period of time, the impact of that would be very detrimental indeed and it would have an impact on the public purse. But also bear in mind that there has been no statement made by Boris Johnson's Government on the shared prosperity fund and, without additional funding to replace European funding if we leave the European Union, then we will lose out by hundreds of millions of pounds from the very outset. So that’s the background. We can't measure the value of this money.

A few questions from me. This was a one-year statement, not a three-year statement. Can you tell us if there is an intention at this particular point to provide more funding into reserves? Because of uncertainties at quite a fundamental level from 2021-22 forward, we will have to prepare for that uncertainty. I also welcome, as a member of the Business Committee and the Finance Committee, as it happens, the intention to bring the budget statements forward. The more time we have to scrutinise those and to go out and discuss them with stakeholders, then all the better, of course.

But may I ask for an assurance, soon, that a decade of cuts to local government funding specifically must come to an end? We must see real increases in budgets now. A flat settlement for next year isn't going to be acceptable. In Ynys Môn, for example, I was discussing with council officials just this week and we will need something in the region of £6 million just to stand still. That is the reality of the situation. And yes, Ynys Môn council had to make the difficult decision to increase council tax by up to 10 per cent last year. They cannot think about increasing it by the same amount next year. That wouldn't be sustainable for my constituents, so that option has gone out of the window. So a flat settlement cannot be sold as good news for next year; we must see a real increase in those budgets.

And with those few questions, for the time being, I will leave it there.

I thank Rhun ap Iorwerth for raising those issues. The first was to recognise that the UK Government had announced a further £2 billion in 2021 to respond to the likely effects of leaving the EU, but I think it's really important to recognise there that, based on what the Chancellor has said, it's likely that Wales won't see—or certainly Welsh Government won't see—much of that funding, because it very much focused on reserved areas of policy. So, we don't have any expectation that that will reach Wales, and obviously that's of deep concern to us. I completely share the concerns that with fewer than 60 days to go until exit day, the Chancellor was completely silent on the issue of replacement funding to support our communities and businesses in Wales. We still have nothing in terms of a future shared prosperity fund. We understand that there is a paper, but I'm starting to wonder if that paper even exists and if the work has been done on it, because it has been promised so many times and hasn't been forthcoming.

So, additional funding will be necessary, and as Rhun ap Iorwerth recognises, it is quite hard to quantify how much funding will be needed, because there are so many things to take into consideration and so many different forms that Brexit might yet take, although we understand what the most likely scenarios will be. So, we are pressing the UK Government to provide further funding to mitigate the impacts of 'no deal', and, again, this is something that we pressed with the Chief Secretary to the Treasury at the finance quadrilateral at the end of August.

I think that it's important also to recognise that, alongside additional funding, we're also seeking new flexibilities to respond to a 'no deal' Brexit and to help us manage that transition through the period of the HMT guarantee. So, for example, that might include increasing the annual and aggregate limits on drawing on the Welsh reserve and so on. So, there are different considerations and different conversations that we are trying to have with UK Government there.

Rhun also pointed out that we've been given a one-year settlement rather than a three-year settlement. And as well as making it difficult for us to plan ahead, there are some quite practical considerations as well. So, when the UK Government is determining the allocation for Welsh Government, there would normally, in the cycle of a comprehensive spending review, be a full review of the comparability factors in the Barnett formula prior to that spending review, and that would set out the proportion of each UK Government departmental budget that is spent on programmes that are not devolved. Recent budgetary information is then used to ensure that those proportions are up to date and reflect the latest UK departmental arrangements. But, unfortunately, in this case, there hasn't been the time or the work gone in to develop those and to refine those comparability factors, and so there's only been a really partial review of those, which means that the Barnett formula is not using the most up-to-date information to apportion spending to devolved administrations. So, that's another reason why a one-year review is completely unsatisfactory, as compared to a more comprehensive three-year statement.

The question was also asked about what consideration will be given to the Welsh reserve. Well, this will be part of the overall discussions that we have in Government. And I share Rhun ap Iorwerth's admiration for local government. I think they've made heroic efforts to keep local services going in very, very difficult times, and we appreciate the huge pressure that local government is under. So, in our early discussions, and as I said in my statement, we've been keen that health remains a priority, but, at the same time, giving local government the best possible settlement is very much at the heart of our considerations.

First of all, I'd like to thank the Minister for her statement. Secondly, I would like to thank the Chancellor, Sajid Javid, for confirming what I've been saying since being elected in 2011: austerity is a political not an economic policy. The national debt has gone up from £1.78 trillion to £1.82 trillion in the last year, so it's not that we've got less debt as a country. And I don't believe that too many teachers, too many librarians and too many doctors caused the recession. I believe it was caused by bankers engaging in casino capitalism.

The UK Government have still not engaged the OBR on preparations for an autumn budget, despite the memorandum of understanding stipulation that they ought to provide the office with 10 weeks' notice. The letter from the OBR to the UK Government makes clear that the OBR would need to know which Brexit scenario their update should be based on: deal or no deal—it sounds like a television programme—before explaining that late notice means Her Majesty's Treasury relying on a rough-and-ready forecast from the OBR or none whatsoever.

I will welcome the extra money; real-terms increases of 2.3 and 2.4 per cent in revenue and capital are obviously beneficial to the Welsh economy. It's very disappointing it was not a three-year settlement based on exactly the same 2.3 and 2.4 real-terms increases.

I have three questions for the Minister. We've seen what we've had from Westminster: has the Westminster Government shown the workings they used to calculate Wales's share and is an appeals mechanism, independent of the Treasury, in existence? We've talked about that for some time—the ability to appeal against what the Treasury said. We can't have the Treasury making a decision and, when you're not happy, the Treasury telling you, 'Well, we've now re-looked at it again and this is what you're getting.' And the last thing is—and this really follows on from what Rhun ap Iorwerth said, and people will know that I'm a great supporter of Welsh local government, no matter which party runs the council, or none at all—does the Minister accept the need for additional money for local government services such as social care and education? And if we're having a real-terms increase, why can't we say now that no local authorities will have a real-terms decrease?

I thank Mike Hedges for raising those points, and also for pointing out again that austerity is a political choice and nothing more than that. It's certainly not a necessity.

In terms of whether the UK Government share their workings out with us, well, that goes back to those comparability factors that the UK Government uses in order to work out our Barnett share for the various departments, but, as I say, they haven't been updated to reflect the most recent responsibilities of departments, which is hugely disappointing. That piece of work would normally take place over a number of months, with the UK Government and Welsh Government officials working closely together, but that hasn't taken place on this occasion. But there's another interesting point here, because our spending round settlement includes an adjustment for non-domestic rates income, and that's an accepted element of the Barnett formula designed to ensure that devolved administrations who retain their own NDR don't also benefit from increases in departmental expenditure limit spending in England financed from the English NDR. Without such an adjustment, obviously, devolved administrations would in effect be benefiting from both increases in their own NDR revenues and then also increases in English NDR revenues. However, the size of the adjustment in the spending round, which is almost £180 million, was certainly unexpected, I think, in terms of what Welsh Government officials had expected to be the case. So, we're in discussions with HM Treasury about that. And that adjustment largely accounts for why the growth in our Welsh allocation in 2020-1—so, the 2.3 per cent real-terms increase—is actually smaller than the increase in UK departments such as health and education, which are more than 3 per cent higher in real terms. So, there could be a case where we would want to challenge that, and the normal way we would do that would be to appeal via the Joint Ministerial Committee. Now, that is an entirely unsatisfactory way of dealing with disagreements between the UK Government and the devolved nations, so part of the inter-governmental relationship and the infrastructure that supports that in future has to include a more satisfactory way for devolved nations to raise their concerns, particularly when it relates to budget decisions and allocations.

I'm not in a position today to make any announcements because I don't think it would be fair to do so, because I haven't completed the latest round of budget bilaterals with colleagues. I've got lots of stakeholders yet to speak to. I've met several times with the future generations commissioner, but I'm also meeting the older people's commissioner, the Welsh Language Commissioner and others in order to discuss their views on the budget, as well as the Equality and Human Rights Commission. And over the summer I undertook a series of visits, which were really helpful. I visited schemes that fell, if you like, under each of the eight Welsh Government priority areas, to further my thinking, really, about what could be achieved, especially when we work in a cross-Government, collaborative way, bringing to life the future generations Act.

I've previously characterised some of the Minister for finance's contributions as a long whinge about austerity and sometimes about Brexit, and when I listened to the Chancellor's statement and heard not just the statement that austerity is over, but the significant increases in spending, and starting calculating what that would mean for what extra money will come to Wales, I thought, 'What on earth is Rebecca Evans going to say now?' I hoped we might hear more about your own responsibilities rather than the whinge about austerity, yet today we've just had more of the same. It's as if there hadn't been any change. Nowhere in your statement did you welcome these increases in spending. If you're so concerned about austerity, when the UK Government starts increasing spending, and increasing it significantly, why don't you welcome it? Everywhere in your statement we see the most pessimistic interpretation. Let me give you a couple of examples. Perhaps some of your backbenchers may be able to assist. You say:

'Since March official data has shown that the UK economy contracted in the second quarter and the latest survey data indicates that it remains weak.'

Why do you go on to the latest survey data? Why don’t you take account of the latest official data? We’ve had gross domestic product data for July that showed that just in one month, from June to July, GDP went up by 0.3 per cent. Unless it falls significantly in both August and September, we’ll see growth in the third quarter. Why didn’t you mention that?

You then go on to say:

'A smaller economy means lower tax revenues'.

Yet, it’s more complex than that. We a have a system that is progressive and not fully indexed, so even if the real economy doesn’t grow, inflation, with other things being equal, leads to some tax revenues over time. Much more significantly, you had to look not just at the overall growth rate, but at the mix of growth, because that makes a huge difference to how much we get in terms of tax revenue. I was concerned at the budget that we were six months on, yet there was no change in forecasts and apparently no consideration as to what the mix of growth was and the implications for tax. Does the Minister for Finance not understand that when we see growth, as we have recently, that is very focused on the consumer, we see a strong labour market in terms of employment and more recently wage growth—that leads through with a significant multiplier into increased tax take? Yet, where we’ve seen weakness in the economy—particularly in investments, to a degree in exports—those areas often subtract from tax take. If you export, you get a value added tax refund. If you invest, you get a capital allowance and spend less in corporation tax. Can the Minister think about the mix in tax and engage with the OBR on these issues, because she’s responsible herself for quite a lot of tax now?

Could I also draw her up on this remark:

'we know that the economy in Wales is likely to be around 10 per cent smaller'?

We don’t know. There was a forecast from civil servants in the Treasury—the same civil servants who gave us those forecasts that there would be an immediate recession if we voted to leave and there'd be an increase in unemployment within a year of over 0.5 million. It didn’t happen, did it? That Treasury forecast has been superseded by several forecasts from the Bank of England. When the Treasury came out with that forecast—10 per cent lower output—the Bank of England had a similar forecast. Yet they’ve since revised it twice. The first time down to 8 per cent, and then down to 5 per cent. Even their projections of a 5 per cent smaller economy relies on an assumption that the Bank of England respond to a ‘no deal’ Brexit by raising interest rates from 0.75 to 4.5 per cent. I don’t think anyone in the private sector considers that to be a realistic assumption, yet the Minister says ‘we know’.

Finally, you refer to eight priority areas and they include decarbonisation and biodiversity. You then say:

'We recognise these eight areas…reflect the times in people’s lives when they may be most in need of support'.

Can you explain how that applies to the priority areas of decarbonisation and biodiversity? Also, if, as you say, decarbonisation is such a priority, why did this Government halve its spending on climate change projects in its first supplementary budget?

Well, I very much enjoyed the fiscal and economic lecture from Mark Reckless and I’ll give him one back, because the UK economy has underperformed relative to all other major economies since the decision to call the EU referendum was announced in 2015. Since the referendum itself, GDP—and Mark Reckless wanted to talk about GDP—is estimated to be between 1 and 2 percentage points lower than would otherwise have been the case. And for illustrative purposes, that equates to between £300 and £600 per person each year in Wales. National income or GDP decreased by 0.2 per cent in the second quarter of this year. GDP per head decreased by 0.4 per cent. Business surveys suggest momentum has remained negative in the third quarter. If GDP contracts in the current quarter, the UK economy will be in recession. At best, mainstream forecasters expect the economy to grow at only a moderate pace over the next couple of years, even if the UK exits the EU in an orderly fashion.

Borrowing—and Mike Hedges referred to borrowing—has increased sharply in the first four months of the current financial year, running well ahead of the OBR’s forecast for the spring budget. The UK Government’s spending round will add further to borrowing, so that the UK Government’s fiscal rules on borrowing and debt may be breached, which means that there’s a high probability that another round of austerity will feature in the near future. The UK Government borrowed £24 billion in the most recent financial year, equivalent to 1.1 per cent of GDP. In the first four months of the current financial year, borrowing is up substantially compared to a year ago. The UK Government's policy on Brexit is trashing the economy. The latest survey data, as Mark Reckless said, is showing that the UK may already be in a recession. The survey data that's used is survey data from the purchasing managers' indices, which have generally got a good and reasonable record of anticipating official data. They indicate that the second quarter's growth rate could be flat or slightly negative, and much will depend on the outcomes for September, which will in turn be influenced by the extent to which businesses and consumers anticipate a 'no deal' Brexit, and, even if third quarter growth is positive, this may be driven by stock building in anticipation of Brexit. So, if this were to be the case, underlying growth could still be negative. So, I hope that that has helped clarify the situation and helped clarify the comments in my statement.

Can I thank you for your statement, Minister? It's clear that, even with the limited increase that we're seeing in this year's spending round, the impact of 10 years of austerity is not being adequately addressed and Wales still faces some very difficult financial situations in the years ahead. It was interesting to hear Nick Ramsay's comments to the First Minister earlier and in response to you, Minister, when even Nick had to recognise that we've had some cutbacks. I think you're starting to master the art of understatement now, Nick. [Laughter.]

But it's also clear from what—[Interruption.] It's also clear from what the former Tory Prime Minister David Cameron has written in his memoirs that he believes that his Government should actually have delivered bigger and faster cuts. He suggested that his Government should have gone harder on the deficit after he became PM in 2010. He said:

'My assessment now is that we probably didn't cut enough.'

And he goes on to say that:

'Those who were opposed to austerity were going to be opposed and pretty hysterically to whatever we did...we might as well well have ripped the plaster off with more cuts early on.'

Would you agree with me, finance Minister, that, in spite of what the Welsh Conservatives say today and the regular calls for Welsh Government to spend more, we now know that in reality they would have preferred to have made even deeper cuts to our budgets and that that should send a stark warning to the Welsh electorate, whenever that election comes, and, under them and their new-found friends in the Brexit Party, that we will not be seeing the desperately needed increases in local government and other front-line services? Would you also join me in condemning their arrogance in calling those of us who've opposed the damage caused by austerity as hysterical?

I absolutely agree, of course, with everything that Dawn Bowden has said and her complete disdain for the comments from former Prime Minister David Cameron that he should have made bigger and faster cuts. Those are exactly the kind of comments that we would imagine from somebody who has no idea of the impact that cuts have on ordinary people's lives, no idea of the impact that it has on the services and the hard-pressed local authorities, the health service and others, because people like David Cameron and Boris Johnson, and pretty much everybody at the higher echelons of the Brexit movement, are completely untouched by normal life. They're untouched by the message that they're putting forward, they're untouched by the implications of a 'no deal' Brexit. They'll be quite happy; they'll be rich whatever happens. But that isn't the case for our constituents and it's not the case for the vast majority of the people in Wales who are being and who will be badly hit by an irresponsible policy.

Thank you very much, Minister.