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

Thank you, Llywydd. Good afternoon, Minister.

How can we expect to see the extra funding for the Welsh Government, resulting from the recent UK Government spending review, deliver benefits for Wales in the coming Welsh Government budget?

Thank you. Well, we've already set out in the statement that I made on the spending review that Welsh Government's priority will continue to be the NHS in Wales to ensure that people have access to excellent healthcare wherever they live in Wales. But, alongside that, we're very keen to ensure that local government does get the best possible settlement for many of the reasons that we’ve already discussed this afternoon—so, the importance of social care, for example, and the importance of all of those services that keep our communities going.

So, those are our two priority areas, but I’ve been having discussions with all Ministers across Government to explore how we can assist them with the pressures that they’re facing. Because, as you know, one of the big areas of spend—around 50 per cent of Welsh Government’s budget—actually goes to pay. And it’s fantastic to see pay increases, but if the additional funding doesn’t come in full from the UK Government, which is hasn’t done, then that does put greater pressure on Welsh Government.

We’ve also been looking, though, across Government, through the lens of those eight priority areas, to explore where there are areas where we can potentially make new and additional funding commitments that will be able to make a difference in those particular eight areas that we have identified as being the ones that could have the greatest impact for people in Wales.

Thank you, Minister, I appreciate it’s early days and I’m looking forward to scrutinising you on the Finance Committee, with my colleagues as well, on the subject of the budget. You just said that you’re lacking money or you haven’t received money from the UK Government, but, as I’m sure you would recognise, the Welsh Government’s resource budget will increase by over £485 million through 2019-20, and the capital budget will also increase by nearly £70 million through 2020-21. So, whilst you might not have received that money today, as we stand here, that has certainly been earmarked for this institution. So, I’d like to hear from you what you intend to do with that to put it to good use.

You mentioned local government. I appreciate that local authority budgets have been under stress, as you said yourself. The Welsh Local Government Association have recently reported that core grant funding has reduced by 20 per cent after adjusting for inflation in 2019-20. If you don’t include school funding, as is the case in English local government, core funding is even lower than that, so, clearly, local authority budgets are under stress. How are you planning, in your budget, to try and make up to local government some of the money that they haven’t been getting, so that they do have that all-important money for public services locally in Wales?

Well, I think it’s important to reflect on the reasons why local government have been struggling in recent years, and that’s very much because of the fact that their budgets have been decreasing as Welsh Government’s budget has been decreasing. Last year, there was funding that was well below the funding that they would have had even 10 years before that, so I think that it’s important to reflect on the difficulties there. It’s also important, I think, to remember that whilst the Barnett formula giveth it also taketh away, and this is one of the issues that we are trying to grapple with at the moment, in terms of the most recent spending rounds. So, there was a negative adjustment by the UK Government of around £180 million. Now, we can understand about half of it, but there does remain an outstanding amount, of £90 million, which we just can’t account for. So, we are in dialogue with the UK Government to explore whether we can find some answers to that. But if nothing’s forthcoming, obviously we’ll have to take that through the disputes to the Joint Ministerial Committee.

Well, I see what you mean when you say that the Barnett giveth and taketh—that’s a good expression in many ways. I got the document yesterday—'Reforming our union', which featured in the First Minister’s statement—and there’s an interesting section on finance here where the First Minister or the Welsh Government recognises that the Holtham floor—the fiscal framework that came out of those discussions—has actually been delivering for Wales, and we’re receiving more for each pound in Wales now as a result of that. I think you’ll be able to confirm that that’s originally £1.05 for every pound, looking to rise to £1.15. So, that money is coming to us, Minister. So, I was a bit disappointed with your answer when you said that the local authority funding has been decreasing with the Welsh Government's, because that’s certainly not the case at the moment.

If I can broaden that out a little bit to the funding formula, which I mentioned before, and can I make another plea? Because if you look in detail at the funding of local authorities across Wales, it’s clear that rural authorities have come off particularly badly over recent years. So, when you tell us that you’re looking to put money into social services and money into local authorities in the future, can you guarantee that there will be an even spread of that cake and that local authority budgets across Wales, in rural areas, will also get a better deal than they have in the past, so that in future the Welsh budgets for local authorities are fairer than they have been in the past?

Well, the local government Minister has been really clear with local authorities that she and I are very open to discussions if local authorities see a better way for distributing the funding that is given to local authorities. And, obviously, the funding formula, as it is, takes into account a wide range of things—rurality being one of them. But we’ve been very clear: if there are ways in which local government can come to a consensus as to what the changes should be, then we’d more than happy to look at those changes. But we’re keen, as I say, to ensure that local authorities do have the best possible settlement within all the challenges that we face.

Plaid Cymru spokesperson, Rhun ap Iorwerth.

Thank you, Llywydd. Will the Minister summarise the main factors and values that determine the financial priorities of the Welsh Government?

Thank you very much. So, the main factors and priories that determine the priorities of the Welsh Government will be found in our programme for government, and where, as I say, we’re looking through this particular budget, through the lens of those eight priority areas that Welsh Government has identified as being the ones for which if we can work more closely and in a more co-ordinated way across Government, then we can have the greatest impact on people’s lives. So, those include things like housing, early years, social care, biodiversity, decarbonisation, employment and skills, and so on. So, those are the areas that we’ve identified as being the key ways in which we can make a difference. But as a Cabinet, we have come to the decision that health will remain our priority within this next budget and, again, as I’ve said, giving local authorities the best possible settlement.

Thank you for those remarks, and with reference to that long list of values that you mentioned, I think we could agree that those could be labelled as 'well-being', and I welcome your comments in that regard.

Can I quote the economist Joseph Stiglitz who said last year:

'If we focus only on material wellbeing—on, say, the production of goods, rather than on health, education, and the environment—we become distorted in the same way that these measures are distorted; we become more materialistic…If we want to put people first, we have to know what matters to them, what improves their wellbeing and how we can supply more of whatever that is.'

I think you would agree with that kind of analysis. The well-being of people is important to us. Famously by now, New Zealand has introduced a new way of budgeting that focuses specifically on seeking to deliver on what’s important to the population’s well-being. Closer to home, the Scottish Government is also measuring its attainment and its performance through the national outcomes, with a statutory emphasis placed on those through the Community Empowerment (Scotland) Act 2015.

Can you, as Minister, confirmed to me whether any application has been made, or any invitation has been given, to the Welsh Government to join an international well-being alliance, where a number of countries work together to develop exactly the kind of well-being budgets that I have mentioned as existing in Scotland and in New Zealand?

Thank you very much. I'm familiar with the situation in New Zealand, and Welsh Government officials have been working closely with officials from New Zealand to better understand each other's approaches, because, actually, many of the things in the New Zealand budget setting approach are incorporated in our approach to the legislation of the Well-being of Future Generations (Wales) Act 2015. So, there are lots of mirrors there, I think.

And in terms of Scotland and their approach to measuring well-being, well we, of course, have our national indicators, which sit underneath the well-being of future generations Act. So, again, I think there's lots of synergy, and, of course, we're open to learning from other nations and sharing our best practice too.

In terms of the particular organisation and the network to which you referred, I'm not personally aware of an invitation, but that doesn't mean that it hasn't been extended. I will certainly look into that, because, as I say, we're keen to learn from others.

Thank you. I understand that an invitation has been made and that the Welsh Government turned down the invitation to join this well-being alliance. I'll write to you as a Minister to share more information about that. And if that is indeed true, I think it's a matter of regret. We do have the well-being of future generations Act, but we cannot rely on that.

I think a few weeks ago, in the Finance Committee, you said that budget adjustments are always made in the context of the well-being of future generations Act. I think the response that came from one former Minister, Alun Daives, was that he was involved in conversations about some of those adjustments and he doesn't remember any conversations about either the future generations Act or 'Prosperity for All' in any of those conversations. So, there are real questions about what is actually happening on the ground. Would you agree with me that, as we have said in Plaid Cymru that we would, as a Government, very much want to join the kind of alliance of well-being budget Governments that I mentioned, Welsh Government would be missing an opportunity if it were not to take every chance to learn from others in implementing the kind of budgets that actually work towards improving the well-being of the people of Wales?

Well, as I say, I'll look into that particular case of the network to which you refer.FootnoteLink As I say, it's not something that has come across my desk, but Welsh Government is particularly keen to engage in networks and learn from others, especially now in the context of Brexit, of course, because our international relationships are as important as they've ever been now in terms of being able to demonstrate what we are doing in Wales and the values that we have here in Wales, which I think are shared by many across the world, and in terms of also learning from others, because we certainly don't have the monopoly on good ideas.

Information further to Plenary

Brexit Party spokesperson, Mark Reckless.

Diolch, Llywydd. Finance Minister, you describe the increase in the Public Works Loan Board interest rates as a retrograde move. In doing that, were you reflecting the Treasury's press release, saying that, by increasing the margin that applies to new loans by 100 basis points, it was restoring interest rates to levels available in 2018? And would you agree with my assessment that the Treasury is looking to rein in quite a large number of local councils? Some I'm aware of on the English side of the border, who've been building very substantial commercial property portfolios, sometimes beyond their council areas, sometimes paying really very substantial sums for retail properties that have been out of favour in the commercial market. And one example: Spelthorne Borough Council borrowed £405 million from the Public Works Loan Board, which was to buy BP's global research centre. And may this reflect the greater degree of austerity that English local authorities have generally seen? For instance, in Spelthorne, its overall budget is only £22 million, yet this £405 million is a vast multiple of that, and they're expecting, I think, this year, to get £10 million of their £22 million budget from net profits on their property portfolio. Is that something that the Treasury have taken action against and have we in Wales been caught up in that?

Well, as you say, the interest rate changed without notice from 1.8 to 2.8 per cent with immediate effect last week. And that does cause difficulty for local authorities in Wales, of course, because they will have to reassess all of their borrowing plans and the plans that they have for strategic investment in social housing particularly, but also in schools and other capital projects particularly in Wales.

I think it's important to note as well that Welsh Government, over a long period of time, campaigned for the removal of the cap on borrowing for local authorities and to allow local authorities to be borrowing to a limit that was sensible for them. You certainly didn't give any examples in Wales where we've seen borrowing to an extent that is irresponsible in any way. So, I think that it is a big problem for local authorities in Wales, because of course it does mean reassessing their plans.

Minister, you referred to regeneration activities and social housing as positive examples where local government in Wales might be borrowing money, but there are also—there's some evidence, at least, of local government borrowing in Wales motivated by the commercial property portfolio investment. One example is Monmouthshire, and we've heard in this Chamber quite frequently how tough Monmouthshire has found the budget in terms of the far, far lesser amount it gets from Welsh Government than many other councils. And I just wonder whether this is their response to it in the way we've seen from these English councils.

It was quite a significant commercial property portfolio that Monmouthshire already had, but there have been two deals this year where they've added to it, funded from the Public Works Loan Board. There was a £7 million purchase of Castlegate Business Park in Caldicot, and then in March, a larger £21 million purchase of the Newport Leisure Park, which is outside the Monmouthshire council area—£21 million spent on that, and they're hoping that there'll be £1.4 million of rent coming in. So, if we have got councils borrowing at 1.8 per cent, now at 2.8 per cent, and potentially getting yields of 6 or 7 per cent, isn't this something that's potentially going to continue and get larger, and what is Welsh Government doing to ensure that such borrowing is appropriate and that the local councils involved have the necessary expertise and aren't taking excessive risks for which they might, at some future date, look for assistance from Welsh Government?

Local authorities, in terms of their own spending decisions, will have to justify those to their local electorate. So, for the examples you gave from Monmouthshire, it would be for the local electorate to explore, or to decide, really, if they're comfortable with the decisions that local authorities are making. But in terms of the overall impact of this decision on local authorities in Wales, of course, the Minister for Housing and Local Government and I will be meeting again with the finance sub-group, as we regularly do, so this will be an item that we can explore with them. And I'd be happy to send you some more information in terms of the guidance that we, through the local government Minister, give to local authorities in terms of borrowing.

Question 3 [OAQ54543] has been withdrawn. Question 4, Siân Gwenllian.