Questions now from the party spokespeople. Conservative spokesperson, Nick Ramsay.

Diolch, Llywydd. Afternoon, Minister. Yesterday, you provided us with an update on the implications of the UK Government's spending round and your priorities for the Welsh Government budget. I hear what you've just said in answer to a previous question regarding the desire to have a three-yearly sustainable projection of spending in Wales, and that's something I think we would all like to see ultimately.

However, could you give us a bit more detail on how you intend to make the most of the additional £600-million-or-so funding, because that is to be welcomed, which is coming to Wales as a result of this spending round?

Thank you. I'll be, in the first instance, completing my current round of bilaterals with my Ministers. So, I have discussions early on in the year—so in March—where we look at what our priorities overall, our strategic priorities for Government, might be. And, again, you'd imagine that health is high up there in those discussions and also support for local government. But then, through the year, we have a range and series of bilaterals with Ministers when they talk about the priorities within their portfolio, delivery against our programme for government, pressures that are emerging within those budgets, but also, crucially, new opportunities in terms of responding to current issues. So, we have the climate emergency, which has been declared by the Welsh Government, so we've had good discussions with each Minister in terms of how we can best respond to that.

Thank you, Minister. The education Minister has joined us in the Chamber. Obviously, a sixth sense operating, as I was going to focus a little on some of the announcements she made yesterday in terms of education spending. School funding in particular, in Wales, as I said yesterday, has not kept pace with inflation. Between 2010-11 and 2018-19 gross budget expenditure on schools has actually seen a 2.9 per cent real-terms cut—real terms I'm talking about now, not in cash terms—and school funding per pupil has widened to £645 per pupil in 2017-18. How are you going to use the new funding allocation to address this?

It's nice of Nick Ramsay to join us because, of course, in answer to the first question this afternoon, I was able to talk to Lynne Neagle about our approach to education and the priority that we are putting on that. The education Minister is quite right that the gap is actually closing and I think that that is something to be welcomed. I was able to outline at the start that education spending per head in Wales has increased to a point at which it's 5 per cent higher now than education spending per head in England, and I think that's important.

Over the recent years, we've made more than £265 million available through direct education grants to local authorities, and that includes regional school improvement grants, the pupil deprivation grant, and also the local authority education grant, which includes the PDG access and so on. In terms of capital spend, we're doing an incredible amount of work through our twenty-first century schools programme, and hundreds of millions of pounds have been invested in that programme as well.

I certainly support the Minister on the issue of the twenty-first century schools programme, and I've voiced my support for that in this Chamber. That is a very good scheme. You mentioned that the gap is closing, but of course that gap is still significant, and it is still a significant gap with spending across the border in England, so we do hope the Government will come forward with policies to close that gap further and also take inflation into account.

It's not just an issue of funding, though, for schools in the current year. A recent report has shown that current reserves held by schools have dropped by 28 per cent from 2016-17. Schools had a total reserve of £50 million in 2018, or £111 per pupil, and that's down from £64 million in 2016. I'm not sure whether you've got this year's figures in relation to reserves, but it's clear that school budgets are under pressure from all angles. So, Minister, how are you making sure that the financial position of schools in Wales, leaving aside the new buildings, which are to be welcomed, but the actual financial position of schools is safeguarded?

If I can just finish by asking you, the Minister for Education set out during the 2019-20 budget that the Welsh Government were investing £100 million in raising school standards over the fifth Assembly term, but that funding, I understand, is not to be allocated to schools via core funding, but through the revenue support grant. Do you think it's time that this was looked at, and that there's a better way to fund schools in Wales so that there is a protection of budgets, so we do really see that improvement in the funding situation of schools that we want to see, and the money doesn't just disappear into other areas where we'd rather it didn't go?

I'm really sympathetic to the need that people have to better understand exactly what our proposals will be in the budget for next year, and I understand the keenness that people have to have some early announcements made. But I think that it would be unfair to go ahead and make announcements before we've had another bilateral round with my fellow Ministers, and also before I've had the opportunity to meet and discuss things further with the children's commissioner, the older people's commissioner, the Welsh Language Commissioner, another round of discussions with the future generations commissioner, and discussions with the Equality and Human Rights Commission. I think that there's a lot of listening and talking to do before we get to the point where we're able to give these indicative budgets for next year. That said, I know that the education Minister has been pleased to accept all the recommendations of the recent Children, Young People and Education Committee inquiry into school funding, and I'm sure that she'll have more to say on that in due course.

Plaid Cymru spokesperson, Rhun ap Iorwerth.

Thank you very much. After a decade of pressure on local government budgets in Wales, they can't face any more cuts, or even stay flat in terms of funding. Can you give us an assurance that local government will be prioritised for 2020-21 with a significant real-terms increase in their budgets?

I can certainly give the assurance that, in the discussions that we've had, the early discussions about priorities, health obviously remains a top priority, but we have all been clear that we want to give local government the best possible settlement. In terms of what more I can say about that, at the moment, without having further detailed discussions, I wouldn't want to say too much more today.

‘Best possible settlement’, I'm afraid, doesn't give me the confidence I'm seeking, and I'm sure it wouldn't give the confidence that local authorities are seeking either. In the past, a flat settlement has been sold to local government as being good news. It is not. I mentioned Ynys Môn in the Chamber yesterday, saying that they needed £6 million. The figure varies from council to council, of course. Bridgend is looking at cuts of £35 million; there would need to be an increase in council tax of over 13 per cent to actually fill that gap in their budget. We can't go back in 2020-21 asking council tax payers in Wales to fill the gap, because the pressure would be too great on them. Additional funding must come from the Welsh Government. Councils are facing pressures of over £0.25 billion next year, and with budgets where there is discretion having been cut so sharply, there is nowhere left to cut now without going to those core fundamental services, such as children’s services, and we cannot afford to cut those. Therefore, I ask again: can I have an assurance that you won't celebrate some sort of standstill settlement as good news, but this time, you will look for an increase to correspond to what local government in Wales say that they need only to stand still?

So, we're having those clear discussions with local government, in terms of what they've identified as the pressures that they're experiencing within their budget, but also their ambitions to do more in future years. I do have a meeting with the local government Minister with the local government finance sub-group, which is the group where all the leaders of local authorities and chief executives of local authorities have the opportunity to talk to me and the local government Minister about finance issues. So, we will be talking at our next meeting, which I believe is next week, and having some early discussions about the budget for next year. We've only had our spending round funding announcement for around two weeks, so, at this point, I'm not able to make the kind of announcements that we're all keen to hear, but I will try and give that kind of certainty as soon as possible.

I note in answers to both myself and other Assembly Members today you have mentioned health first of all as the priority, and all of us, of course, prioritise health, but can I ask you to draw together health and social care in your consideration of what happens to local government funding? Because there's every danger that by pumping into health what some may deem to be necessary for health, very limited resources are left to spend on local government. Without funding for social care in local government we are never going to solve the cumulative and collective health and social care issue. Therefore, can we have an assurance that social care delivered through local government will be prioritised as much as health when it comes to the budget for 2020-21?

I completely agree that health and social care are completely interlocked—you can't separate the two. Pressures in one area will inevitably lead to pressures in another. And investment in one area can benefit the other, which is why we have the integrated care fund. I was pleased, in my previous role, to announce £130 million of additional funding, capital funding, for the integrated care fund to look at housing-based solutions for health and social care issues. And the integrated care fund on the whole is doing fantastic work in terms of changing that trajectory for people, if you like, so that they're able to have their hospital admission prevented, or if people do go to hospital, then it ensures that they are able to leave hospital much more quickly and return either to home or another step-down service. So, we've already recognised the interconnectedness of health and social care, and clearly that will be part of our considerations in the budget.

Brexit Party spokesperson, Mark Reckless.

Minister, you spoke at some length around the block grant for next year and what we now know following the one-year spending review. The other side of your revenues that you'll be able to use to fund spending commitments in Wales are the revenues from the devolved taxes, and I wondered if you could update us around those in the supplementary budget. Notwithstanding another half year’s data, we didn't see any changes in the forecast. The Finance Committee scrutinised this agreement, which I think we broadly support, with the Office for Budget Responsibility, but I wonder, given what’s happened with the UK Government—. I think you said yesterday the OBR hadn't yet been tasked with doing a UK-wide forecast. What impact will that have on how they support you on the forecast for Welsh devolved taxes? Will they be forecast on a self-standing basis just for Wales, or will the OBR still be looking at a comparison with England as to what those taxes will be?

So, we're in constant discussion with the OBR and the majority of our funding is still determined, of course, by the UK Government’s spending decisions, which have just been announced. As you say, there are no new fiscal forecasts alongside the announcement, so there’s no update to the devolved revenue forecast for Wales. But the next tax revenue forecast for the Welsh Government will be published alongside the Welsh Government’s draft budget for 2021. So, I said yesterday that I'm hoping to bring forward the publication of the draft budget to the start of November, subject to the agreement of the Finance Committee and the Business Committee. So, we'll be publishing those details alongside the draft budget. And, of course, the two fully devolved taxes are still on course to bring in over £1 billion in their first two years to fund public services here in Wales. The OBR, in their March forecast, said that rates of income tax will raise around £2.2 billion in their first year. So, we have those forecasts but expect more detailed forecasts to be published alongside the budget in November.

But if the OBR is not tasked, at least yet, by UK Government with doing forecasts on a UK basis, how will it be doing those Wales forecasts? Has it got a model of the Welsh economy and will be looking at Wales in isolation, or will it be doing a UK forecast despite not being tasked with that by the UK Government and then applying a variance for Wales? And will the Minister say a little more about what her team are doing and the resources that she has to support that liaison with the OBR? Because it is the Welsh Treasury that is responsible for making those forecasts, and then the OBR will test and validate them, and this is new work for her and her department. For instance, we saw earlier today that house price inflation in Wales was higher than any of the other nations and regions of the UK. Why is that? Does Welsh Government expect that to persist, because that will have an impact on revenue? Similarly, employment growth in Wales and wage growth in Wales—how does Welsh Government expect that to compare with the UK and why, since our revenues and ability to support spending will rest on those judgments, albeit validated, we hope, by the OBR?

So, at the annual tax conference, which I held back in July—and I was really pleased that Mark Reckless was able to join us at that—the OBR gave a very detailed presentation that set out how it considers various elements and what it considers in terms of being able to provide those forecasts. So, they were providing forecasts for us specifically here in Wales, but obviously drawing on a range of data from elsewhere. I think that they'll be doing the detailed work for us here in Wales. I would imagine, by that point that, they potentially would have done it for the UK Government as well. We have to presume that there will be an autumn statement and they will be engaged, I would assume, almost immediately to undertake work to inform that.

If it's helpful, Llywydd, I could organise a technical briefing for Members from the OBR, which might give an opportunity to explore further some of those detailed questions that might be of interest as we start to move towards publication of updated forecasts.