I'm pleased to open the debate this afternoon on the Welsh Government's draft budget for 2020-21. This builds on the constructive debate that we had in the first week of this session. Since then, the Finance Committee and the other Assembly committees have scrutinised our spending plans set out in the draft budget. I'd like to place on record my gratitude to the Finance Committee and the other committees for doing so, and for publishing their reports in the truncated timescale as agreed before Christmas.

Today's debate provides an opportunity for me to provide some early reflections on the recommendations and the general themes arising during scrutiny, focusing in particular on the Finance Committee's report. Before I do that, Llywydd, I want to acknowledge the wider context in which this budget has been developed and the challenges that remain, before reminding Members how this budget delivers for the people of Wales.

As I have rehearsed a number of times, the failure of the UK Government to deliver on its multi-year comprehensive spending review last year means I am only in a position to lay a one-year revenue and capital budget. Despite claims that austerity is over, the Welsh Government budget in 2020-21 is nearly £300 million lower in real terms compared to 2010-11.

Within weeks of confirming the long-awaited UK budget will take place on 11 March, the UK Government has once again demonstrated its chaotic approach to managing public finances. With just over a week before we published today's second supplementary budget, the UK Government confirmed both positive and negative adjustments to our budget for 2019-20. Most of the positive consequentials had been confirmed by the Treasury earlier in the year, but not the reductions.

When compared to the planning assumptions we have based our plans on, the net result of these changes is a modest revenue uplift, with a simultaneous reduction of just over £100 million of financial transactions funding and nearly £100 million general capital. This is wholly unacceptable at this stage in the financial year without any prior notice, and by no means the first example of the UK Government ignoring the principles set out in the statement of funding policy.

I've written to the Chief Secretary objecting strongly to the principle of these changes being made so late in the day. We do not accept them, and have pressed for further clarity on the changes at a UK level that result in consequential reductions.

Notwithstanding this, however, we have agreed we will absorb the financial transactions reductions this year, which is prudent financial management in the circumstances. I have also secured the maximum flexibility from Treasury to manage the other adjustments as we move through the next year. Our decision to take this approach is without prejudice to the further discussion on the wider position and the handling of reductions carried forward.

At this stage, I believe it's also prudent not to adjust the spending plans for 2020-21 that I've tabled before the Assembly, given the strong likelihood our settlement for next year will change again on 11 March. It does, however, reinforce our case for additional funding flexibilities and a more formal role for the finance Ministers' quadrilateral in reviewing the statement of funding policy—a theme drawn out in the Finance Committee's report.

As well as possible changes to our settlement, the UK budget could also include changes to tax policy, which might affect decisions about the devolved taxes in Wales. As well as considering proposals to bring forward an early supplementary budget, I am committed to providing an early update on the impact of the UK budget, including the impacts on Welsh tax forecasts.

Llywydd, I'd like to turn to the spending priorities set out in this budget. I am proud of everything we have achieved as a Government, despite the uncertainty and the challenging context that we have faced. This fourth budget of this Assembly, which provides for the final full year of this term, delivers on the key spending pledges we made to the people of Wales in 2016 on all-age apprenticeships, school improvement, childcare, help for small businesses, quick access to new treatments, affordable housing, and much more.

We are bringing our total investment in health and social care to more than £8.7 billion in 2020-21, with an above-inflation increase of more than £400 million; providing a real-terms increase to every local authority through an extra £200 million through the revenue and capital settlement next year, which will bring total funding to nearly £4.5 billion; and we're supporting a world-class education system through the local government settlement and through our £1.8 billion education budget.

Prevention has been at the heart of this budget, supported by our focus on eight cross-cutting priorities of: early years, social care, housing, employability and skills, better mental health, decarbonisation, poverty, and biodiversity. We're investing in the areas where we can maximise our impact over the longer term, and this includes an extra £175 million capital next year, taking our investment to more than £2 billion in affordable housing over this Assembly term; and an additional £19 million to help some of the most vulnerable people living in poverty in our communities, building on existing action totalling more than £1 billion; and increased investment in better mental health and early years through the extra funding for the whole-school approach and Flying Start.

This is a budget that delivers a new level of ambition in the fight to protect the future of our planet, building on the wide range of investments that we're already making. That is why, in the first budget since our declaration of a climate emergency, we are allocating a new £140 million capital package to support our ambitions for decarbonisation and to protect our wonderful environment.

Llywydd, I'd also like to take the opportunity today to provide some early reflections on the key themes arising from scrutiny. With the process of leaving the EU now under way, the importance of ensuring a smooth transition to a post-EU UK funding framework that delivers for all parts of the union is imperative. I welcome the committee's recommendation that recognises the need to review the statement of funding policy, which will be particularly important in the context of post-EU-exit arrangements. I also accept the Finance Committee's recommendation that we continue to negotiate with the UK Government to secure more frequent and structured quadrilateral meetings of UK finance Ministers. This is a matter I will raise with the Scottish finance Minister and Northern Ireland finance Minister tomorrow.    

The interaction between our budget timetable and that of the UK Government's is a matter that's been considered in previous years, but the awkwardness this year has been more prominent. I welcome the acknowledgement of the committee that our approach to the timing of this year's budget was practical in the circumstances, and balanced the need to provide early funding certainty for stakeholders against providing time for scrutiny of our plans. 

Continuing to drive forward improvements in our budgeting is also an important consideration. For the first time, we have published a budget improvement plan that sets out how we intend to take continuous steps to embed the Well-being of Future Generations (Wales) Act 2015 into the budget process. This includes a number of areas identified by the Finance Committee, including improvements to how we assess the impacts of our budget decisions. I welcome the Future Generations Commissioner for Wales's statement that Wales should be commended for being at the forefront of a movement towards well-being budgeting, and I look forward to working with the commissioner as we take forward this ambitious plan. 

I am pleased that the Finance Committee has welcomed the single largest ever capital package to help combat climate change. I'm disappointed by claims that the action that we're taking does not match our commitment to tackling the climate emergency. The draft budget will deliver new investment in the areas where the current evidence tells us we can have the greatest impact, as well as investing in other measures such as £64 million next year to defend our communities from the most severe and immediate impacts of climate change. I and my colleagues will respond formally to the recommendations of the Finance Committee report and those of the other Assembly committees in advance of the vote on the final budget next month.  

So, Llywydd, to conclude, despite ongoing austerity imposed at the UK level undermining our ability to deliver the investment our country truly deserves, I am proud to introduce a budget that continues to invest in our vital public services while supporting our ambitions for a more equal, more prosperous and greener Wales.