Order, order. Item 16 is the Finance Committee debate: the Welsh Government's spending priorities for the draft budget 2021-22 in light of COVID, and I call on the Chair of the committee to move the motion—Llyr Gruffydd.

Motion NDM7351 Llyr Gruffydd

To propose that the Senedd:

Considers the spending priorities for the Welsh Government’s Draft Budget 2021-22.

Motion moved.

Thank you very much, temporary Deputy Presiding Officer, and, as Chair of the Finance Committee, I am very pleased to be opening this debate today on the future spending priorities for the Welsh Government. As this Chamber will know, of course, for some time the Finance Committee has expressed its concern that the Senedd does not have a formal opportunity to debate and, hopefully, as a result, influence the Welsh Government’s spending priorities prior to the draft budget being laid. Last year was the first time we held this type of debate, which was particularly pertinent, of course, given the implications of Brexit and a general election at the end of the year.

In our report on the 2020-21 draft budget, we recommended that the Welsh Government should consider how a debate on spending priorities could be factored into the budget timetable to ensure the Welsh Government was able to take into consideration the views of the Senedd prior to publishing its draft budget. I am very pleased that the Minister for Finance and Trefnydd and the Business Committee have agreed that this type of debate should be held annually.

The upcoming draft budget will inevitably be affected by the outbreak of COVID-19, the end of the Brexit transition period and the delayed UK spending review. Last week, we had a summer statement from the UK Government, which included further funding consequentials for the Welsh Government. However, we still have no forward funding figures for 2021-22. It is clear that, for effective planning by the Welsh Government and to afford the appropriate level of parliamentary scrutiny, the devolved Governments’ budgets have a dependence on the timing of the UK budget. Therefore, I and my counterparts in the Scottish Parliament and the Northern Ireland Assembly have written jointly to the Chief Secretary of the Treasury asking for an early indication of the timing of the UK budget and an assurance that consideration will be given to the impact of that timing on the respective budget processes across the devolved nations.

The Finance Committee normally holds an annual budget stakeholder event, but unfortunately this year, given the current social restrictions across the country, this has not been possible. This is disappointing for the committee and I’m sure that it's disappointing for stakeholders too, as these events have been very well received in the past. It is a great opportunity to hear early on the views of stakeholders on where the Welsh Government should be prioritising its spending. This is then used by the Finance Committee and other policy committees to identify a number of areas to focus its budget scrutiny on. Instead, this year we have undertaken online engagement to seek views on what stakeholders and the general public think the Welsh Government’s spending priorities should be. I would like to thank everyone who has contributed to our polls and surveys. The committee recognises that the engagement exercise was restricted, of course, in scope as the sample used was self-selecting and not based on a representative sample of the population. However, it provides an interesting snapshot of views and we have as a result identified a number of areas that we would like to focus on.

Comments received from the engagement indicated the health service and education were key areas of priority, with one participant stating that more initial investment in health and education was needed to help catalyse a culture of healthier lifestyles to reduce future strain on the NHS and free up budgets in the long term. Clearly, the impact of COVID-19 will be an issue for the Welsh Government in setting its next budget. Forty-nine per cent of participants felt that there should be significant changes to the amount spent for the next financial year and subsequent years as a result of the pandemic. However, there was little appetite amongst the participants to raise taxes to increase the amount the Welsh Government has to spend in Wales, with some saying that reducing taxation would stimulate capital inflow and domestic spending. A positive response was received for increased borrowing to take advantage of record low interest rates, and we have supported the Minister’s request for flexibility over borrowing and access to the Welsh reserve in our recent supplementary budget report. However, 27 per cent of participants skipped the question about taxation and borrowing, and this could indicate that more needs to be done by both Welsh Government and this Senedd to raise awareness amongst the public of fiscal devolution in Wales.

Participants felt strongly that climate change and sustainability should be factored into the Welsh Government’s decisions on spending. Participants believed that there should be a focus on green transport, making it easier and safer to walk, cycle or use public transport, to bring health benefits and reduce the burden on health services. The Welsh Government declared a climate emergency in April last year, and there are clearly opportunities to capitalise on the widespread changes in human behaviour caused by the coronavirus outbreak to use spending in the 2021-22 budget to progress a green recovery from COVID-19.

Last week’s summer statement included some welcome additional funding, measures such as the job retention bonus and support for the hospitality and tourism sector. However, it is clear that there are significant risks to the Welsh economy and more investment is needed as well as a range of policies by the United Kingdom and Welsh Governments to steer the economy out of recession. It is crucial that the Welsh Government has more certainty of funding and more flexibility, too, to access borrowing and reserves to achieve this.

Combined with the uncertainties around how the COVID-19 crisis continues, and uncertainty regarding funding available to Wales, it is all the more important for us to have this debate today. We need to use this opportunity to carefully consider what kind of economy, public services and society we want to see as we emerge from this crisis and what this could mean in terms of priorities and investment decisions in the next Welsh Government budget.

Collectively, we need to ensure that the budget is used as effectively as possible in order to best meet the needs of Wales, to ensure the population is healthy, educated and safe, and that the economy is recovering and thriving. I look forward very much to other Members’ contributions today.

All too often, the obvious thing to do in these debates is to list all the priorities that face yourself or your constituency. Rather than read out a list of areas where I believe additional spending would help Blaenau Gwent—be it education, health, business support, local government or even mitigating a disastrous 'no deal' Brexit, what I'd like to do this afternoon is to do something a little different and to focus on how I believe the Government should be approaching this budget round, and some of the actions that would flow from those points of principle.

Setting a budget today is very different to the process of setting a budget when I was first elected, 13 years ago, when essentially setting a budget simply meant taking spending decisions—decisions about where different areas of budget would be spent. Now, of course, we have to set a balanced budget and we have to look at how we raise funds as well as how we spend funds. And that demands a very different budget process. It also demands that this place acts in a different way. The Finance Committee has been investigating a legislative budget and financial process. I believe that time has come. The First Minister, in his evidence, said the time will come at some point. I believe the time has come today when we should be putting in place proper systems and structures of scrutiny for all expenditure and the raising of taxation. I do not believe it is right that we tax people in this country without passing a piece of legislation that sets the basis for that. We need greater supervision and greater accountability in terms of budget setting, and that means ensuring that we have a legislative budget round established here in statute, probably at the beginning of the next Senedd. And I hope that the Government will pay notice to that. 

But in taking it forward, I think there are certain principles that we have to be very clear about. A lot of people have talked about returning to normality after the COVID crisis, but let me say this: for many people who we all represent in this country, the old normal wasn't a very happy experience. It wasn't a very happy experience to be working two or three different jobs for the minimum wage, with terrible terms and conditions. It wasn't a very good experience to be living in poor housing, without any sense of a future that we could look forward to. We need a new normal that is better than the old normal—a new normal where we can catch buses and work in secure employment for a decent wage and decent terms and conditions. But we also need to ensure that sustainability is rooted right through the decisions that we take. 

I was very disappointed that previous finance Ministers—not the present incumbent—have refused point blank to include sustainability as one of the key guiding principles of Welsh Government budget decisions. I hope I'll have more luck with this finance Minister than I've had with her predecessors, but I would certainly argue that sustainability is key to it. But secondly, and thirdly also, are social justice, fairness, equality and understanding what the future is going to be. All too often when we set our budgets we look at what was spent last year and then we try to increase it a little bit or potentially decrease it a little bit next year. I think we need to look hard at what the future's going to be. We know that we're going to see significant industrial change in Wales as a consequence of technological change. We know that COVID has already changed the way that many of us behave, and some of those changes are going to be permanent. We need to be able to look hard and understand that future, and then take decisions that are rooted in the political principles of sustainability, of fairness and equality and social justice, and then take decisions on how we spend the money available to us.

But I also want to see tax policy as a central part of this. I do not believe that we can achieve our ambitions within the quantum of funding available from a Tory Government in London that doesn't share our same principles, our same values and our same visions, and we need to be prepared to argue that through a process here in setting a budget.

So, what does that mean in practice? Acting Deputy Presiding Officer, I want to see the Welsh Government investing in people, in places, in jobs, in quality of life. I want to see us investing in the future of town centres, which need to be very different to what they were when I was growing up. Those town centres that I grew up with in the Valleys are not going to be the same ever again. We need to reinvent that and we need to be able to fund that. We need to invest in our communities, so they're places where people can feel safe and where we people want to and enjoy living. We are also seeing a huge number of redundancies taking place up and down the country, and not just redundancies where we see the headlines, but people losing their jobs in small companies and businesses that don't grab the headlines, but together is changing many communities and many people's lives.

I hope that we will—and I won't test your patience, acting Presiding Officer; I'll say this in closing—that the Government can act with speed, agility and with urgency. We do not have the luxury of time available to us, and many of the people we represent do not have the luxury of time available to them. It isn't good enough to make speeches about what we want to see; we need a budget that will deliver what we need to see. Thank you. 

Okay. If we stick to five minutes or thereabouts, I'm going to get everyone in. I've got three more Labour Members who want to come in and I'm very keen to call them. Nick Ramsay. 

I've got the message, Chair; I will be succinct. Thank you, and I'm pleased to contribute to this debate and, indeed, to follow the Minister emeritus—it's always good to listen to what Alun Davies has to say. It did amuse me slightly when you said, Alun, that you hoped you'd have more luck with Rebecca than her predecessor, because her predecessor was, of course, the First Minister, so I imagine that you need to speak to him as well about making sure that some of those issues on sustainability really do factor in the future. 

Having this debate in advance of the Welsh Government's draft budget-setting process is certainly a different way of doing things; I can't remember when we've had this sort of debate, this sort of discussion before. And looking at the agenda, 2021-22 does in many ways seem a fair way off, but this Senedd can have some input into that process now, and I think it's a good move that we do seek to have some sort of input into that. 

On the issue that Alun Davies raised about moving to a legislative budget process, this is something that I was open-minded about for a long length of time, but I must admit that as time has gone by the persuasiveness of the argument for a proper finance Bill to vary taxes, and so on, has actually dawned on me as a good way to proceed. As Alun said, this is something that the Finance Committee is looking at now in detail, and it's something that I think that we should do more work on and something that we should recommend as a good way of doing business in the future, particularly as the tax powers of the Assembly bed in and expand. 

Of course, the difficulty with having this debate at this time, although we do try to have debates as normal as possible, is the backdrop of the pandemic and the nature of the ongoing situation. In terms of the next budget-setting process for the Welsh Government, much is going to depend on what happens over the rest of this year, over the autumn and, indeed, moving through the next years with regard to the pandemic and whether there's a second peak. 

And of course, aside from that, we do want to build back better, an expression that I used earlier in questions, and I think it's a good one. I think it does explain quite lucidly how we as a Senedd, and how the Welsh Government, should be looking to rebuild the economy. It's not just a question, as was just said, about going back to the old normality. We want to come out of this pandemic building for the future in a more sustainable way than we did in the past, and taking the opportunities that have been presented and not just reacting to some of the challenges, which the Welsh Government has had to.

So, the Welsh Government budget should be showing clearly commitments to that process of rebuilding in a sustainable way. The future generations legislation requires that sustainability is at the heart of all aspects of Government workings, including the budget, but too often it isn't. The climate emergency has made this imperative; we often talk about the climate change emergency, but too often it isn't actually an emergency that gets the sort of attention and focus that it should. So yes, these should all be at the heart of the budget-setting process, not just an add-on at the end, but they should feature at the start and throughout. And if the Welsh Government, for whatever good reason, needs to deviate, or feels it needs to deviate from some of those principles, then okay, but we as a Senedd need to be told and it needs to be transparent why that is the case. The next draft budget process has to green the economy as we grow out of the pandemic.

I think broadband—I mentioned this earlier; it's going to be my main point today—is absolutely crucial. Yes, we can improve the road network, yes, we can improve the rail network, and these are all things that we should be doing. But if we actually get the broadband and the digital infrastructure right at the start, then we won't need to be creating that same level of capacity and maintaining that same level of capacity that we have in the past. There are still far too many areas of rural Wales that do not have adequate broadband provision. There have been mistakes made in the past in dealing with some of those contracts, and that needs to be put right. I hope that the 2021-22 budget does feature a real determination, at every level and across departments, to get the broadband infrastructure of this country right, to fill the notspots, and to try to get up to 100 per cent coverage as much as possible, but also reliable coverage.

I will say, just to bring it to a conclusion, Chair, that in terms of some things the Welsh Conservatives would like to see, well, we've long been arguing for the repurposing of spending to create a COVID economy recovery fund. We'd like to see a £250 million fund that could be used to help towns and communities across Wales. There's also a strong argument, I still say, for scrapping business rates for businesses up to a rateable value of £15,000, to kick-start the economy and to support businesses at this time and to allow them money to invest in their workforce and in the future. We've also said that we would create business-rate-free zones, with a business rate holiday for up to three years for businesses that qualify to go into those areas. Those are just a few areas that we think could go into the next budget.

But aside from the actual content of that budget, I think that this is a very good way to proceed. I hope that, in future, we do have more discussions at the very outset of the Senedd budget-setting process, to make sure that the Welsh Government is well aware of the views of this Senedd at the earliest opportunity of forming its budgets.

I'm also very pleased we're having this debate prior to the publication of the draft budget. This means we're not replying to a draft budget, but putting forward suggestions for consideration. It also means other political parties can produce their own budget proposals. Unfortunately, up to now, all we get is demands for reduced taxation here and increased expenditure there. Can I urge the Conservatives and Plaid Cymru to each produce a budget so we can discuss it as part of the budget process, rather than just saying, 'We want to tax less and spend more'? It only needs to be headline amounts for the major spending areas and any changes in taxation.

This year's budget is going to be different because of the effect of COVID on it. COVID has changed the way many of us work and shop. Is this a short-term change? Are people going to leave online shopping and go back to the shops? Are people going to stop working at home and go back to their offices? We don't know. My expectation is that some will and some won't, but it certainly will be a change. The retail sector has faced large-scale business restructuring—85,000 jobs lost, over 9,000 store closures—but despite this, online sales continue to grow, reaching 21 per cent of total sales. Again, with homeworking: a trend from a slow growth in homeworking to a giant leap during lockdown.

There is a danger the Assembly agrees a budget that will work for last year, but will not work for this year—we're solving last year's problems. The first thing about a budget is what it's attempting to achieve, and I'll just say that we want a green, prosperous and healthy nation. Well, you're not going to be voting against that, are you? But I think that what we need to do—. What are we going to try to do and what do we disagree with?

Can I start with the economy? The provision of financial incentives to bring branch factories to Wales have produced very many unhappy endings. If you have to bribe a company to come here, I can tell you: they don't want to come. They're only coming because you're bribing them and if they get a better offer somewhere else, they're off. We all know of examples of this. Vincent Kane used to talk for 25 to 30 minutes about all of the companies that came and didn't produce the jobs that they promised and then ended up leaving. 

I remember a Government Minister saying that we have the best financial incentives for inward investment—probably true. They saw that as a great sign of strength—we were the best. I saw it as a sign of weakness. Put simply, if you have to offer a larger financial inducement than anyone else, then, when somebody comes, they will leave when somebody else makes a better offer.

What sort of financial incentives do they give in Cambridge? What sort of financial incentives are they giving in Silicon Valley? They don't, because people want to go there. Our problem is that we need to create an economy, we need to create a skilled workforce so that people want to come here. I'll give you two examples. Remember LG in the 1990s? The Welsh Development Agency's whole budget was taken to go and bring LG here. It didn't end very well, did it? Compare that with Admiral—a start-up company of seed funding. That's ended up very well. We need to grow our economy and for that we need to invest in education and use research paths and universities to grow the economy. That's what happens in the rest of the world. Why we aren't joining in, I don't know.

Money spent on education is by far the best economic development expenditure there is. With a highly skilled and educated workforce, companies will want to come here, without us having to say, 'Here's the money.'

A number of good things have come during the COVID crisis. Firstly, street homelessness has almost completely disappeared. I, and many others in this Chamber, do not want it to return post COVID. We've had long debates in here, cross-party, including you, acting Presiding Officer, about the fact that we don't want street homelessness and that we should be doing something about it. Well, COVID came, and we managed to. We can't go back. If we can deal with street homelessness during the COVID crisis, then we can deal with it in non-crisis times.

Secondly, we have provided food to children on free school meals during the holidays. I've been asking for this for as long as we've been here. This has happened this year. It must continue.

Thirdly, what we've seen during the pandemic is just how important local government is and how good local government is and how local government has performed incredibly well during this. 

Predictions: the health budget will receive the largest increase and the least scrutiny regarding outcomes. What will health do with the extra money? We need to have health outcomes and health improvements. Every intervention should improve the life of the patient. Too often, an operation is a success, the patient is unable to go home, so has to go to a nursing home. I'm not sure that that's a success, but I'm sure that hospitals and consultants will say that it is because the operation worked.

Finally, we need to protect habitat and the environment, and a lot of this is much more about attitude than about money. A lot of these things can be done with very little money, but real commitment, and I hope the Welsh Government will start thinking along those lines.

Exemplary timekeeping. Rhun ap Iorwerth.

Thank you very much, temporary Deputy Presiding Officer, and thank you for the opportunity to participate in this debate today. Thank you to the Finance Committee for bringing this motion forward. Unfortunately, because of timetabling in this place this year, I can't be a member of the Finance Committee and I do regret that fact, but I am grateful to the committee for its thorough work in giving consideration to the priorities that that we face in an entirely new context.

As ever, there is a broad range of priorities that have been set out by those who responded to the committee's engagement work, but these are not normal times, and therefore the priorities can't be normal either. We have an unprecedented context, following an unprecedented period of four months, which will mean a lot longer than four months in terms of difficult times ahead. And the implications of what we've lived through, and continue to live through, are going to be with us in terms of spending decisions for years to come.

I do think that we have to be bold in our response to this situation. There are so many individual things in our lives—just look around us—that have changed as a result of this pandemic. There are things that we hope to put behind us as soon as possible, and return to normality, but there are other things that we all hope will remain with us—the positive experiences, the lessons that we've learnt, and the change in mindset that has emerged over the past few months. And that's what I would like to see reflected in the way budgeting happens within Welsh Government and in terms of the scrutiny that our Senedd provides of it.

There are specific things, such as our understanding of the value of local government. As Mike Hedges said, we must ensure that, through our budgetary process, we reflect the fact that we have once again come to appreciate the work done by local government. We must bear in mind that care for others has become a more valuable commodity in all of our minds now. And whilst I and Plaid Cymru have been calling for the adoption of well-being budgeting as has happened in other nations—I've been calling for this for quite some time—there's a different context for that now and I think that thinking about making spending decisions in a way that truly takes account of their impact on people and their individual circumstances has become more important than ever. I suppose that decisions on spending on environmental issues is also part of that.

We've come to appreciate the world around us and the threat posed to our environment in a very different way during this pandemic. So, whilst many of us have been calling for the prioritisation of expenditure on the climate crisis, that has become more important still now. What the research of the Finance Committee has done is to demonstrate very clearly that people want that to be reflected in Welsh budgets. If I remember correctly, 78 per cent of those that responded to the Twitter poll—. Of course, we can't be entirely confident in such a poll, but it does give us a signal that almost 80 per cent of respondents felt that environmental decisions should be driving decisions on expenditure and the budget.

There are some specifics that we could mention and that I would want to see included in a budget that responds to the crisis—things such as an employment guarantee for young people between 18 and 24 years of age; funding for reskilling Wales as a result of this crisis, and the need to build back economically and to upskill our young people to do that; the need for a Welsh renewal fund, billions of pounds, and more borrowing powers in order to deliver that. And I will be encouraging and supporting the Government in pushing for changes to our fiscal rules in order to ensure that we can make those investments now, in the ensuing period, because this is the time when we need to look at things differently and build a Wales that is fit for the future.

Thank you, acting Deputy Presiding Officer, for the opportunity to make a brief contribution in this important and very welcome debate. I think it's an excellent innovation, one I hope we can continue, and I very much hope that the Welsh Government will be listening carefully and taking very seriously the points of Members. 

I recognise that the pandemic has been an extremely challenging time for the Welsh Government to make budget decisions. We know that budgets are under immense pressure and I think it's understandable that Governments have wanted to make quick decisions to get money out of the door to make a difference. But that doesn't always mean that those are the right decisions.

One such decision I'd like to pick up on today, and highlight as a future spending priority, is the £7 million that was removed from the mental health transformation fund, which I've raised concerns about previously in the Chamber. And there has been, I think, a fairly worrying lack of transparency about what has become of that money. Now, I know that some of it was allocated to staff mental health because of the COVID crisis, and that, of course, is entirely right—that we should look to support the mental health of our staff who've been on the front line in this crisis. But as I've said before, I feel strongly that that money should have been additional money, and not removed from a vital transformation fund.

Now, Members know that I've been very involved in campaigning for improvements to children's mental health services in Wales for the last few years, and I can tell Members that there is a very long way to go in terms of getting the improvements that we need. Now, that fund, as well as being for children, was also for adults, and I can tell Members that, actually, I think the situation in relation to adults is much worse, and there is an even more pressing need for continued investment in that area. Welsh Government talks a lot about the need for there to be parity between mental and physical health, but as far as I'm concerned, we are a very long way from that point in Wales.

I would have made those points before a global health pandemic, but the fact that we've had this pandemic makes those points even more pressing. This is a pandemic that has impacted all our mental health—we've all experienced anxiety, fear and trauma—but for some people, this pandemic will lead to lasting mental health problems. We've had people who have been shielding and not seen a soul for many months. We've had people who've experienced bereavement in the most abnormal of situations, where they've been unable to hold the hand of those they love. And, of course, we've got a recession coming down the track towards us, and we all know the links between economic recessions and poor mental health, and even suicide. So, I think there has never been a more important time to invest in mental health services. It really is time now, I think, for the Government to put their money where their mouth is in terms of saying there should be parity between mental health and physical health. And, Minister, a first, good start for me would be putting that £7 million back in the mental health transformation fund.

I wanted to make two other points about principles that should inform the budget. I think inequality is one of them. The pandemic has been one that entrenches disadvantage. We've seen that in those who die—almost double the deaths in more deprived communities. We've seen it in the impact on those who've suffered the most, in terms of children who've struggled in poorer families to access their learning because of lack of digital resources, and even the people who've been able to stay safe by working from home. It is vital that the budget recognises that, and I wholeheartedly endorse Mike Hedges's comment—there is no more important strategic investment we can make than in the education of our young people. Has there ever been a time when that investment for our young people has been more important when the future looks so bleak?

And just finally, then, in terms of inequality, I'd like to highlight, again, the issues of health funding. I spent my early years in this Assembly campaigning for a needs-based NHS allocation formula. In the end, the Welsh Government came with up the Townsend formula, which was meant to allocate resources to the communities most in need of health spending. That formula has never been properly implemented. I think now is the time for Welsh Government to really look at how those spending decisions you take are actually implementing on our most disadvantaged communities. I can tell you that as far as Torfaen in concerned, we feel we've waited long enough. Thank you.

And finally, before I call the Minister—Rhianon Passmore.

Thank you, acting Presiding Officer. The prospects for the economies of Wales and the United Kingdom are troubling. As the Welsh Government looks at its spending priorities for the draft budget for 2021-2, let nobody in this Senedd pretend that the economic prospects facing the Welsh Government are anything other than grim and of utter criticality to Wales.

Yesterday, the Office for Budget Responsibility updated its coronavirus scenario for the United Kingdom in its fiscal sustainability report. It offers us a dramatic and alarming prospect for the United Kingdom's public finances. The Office for Budget Responsibility assumes that 1.8 million have already lost their jobs, and unemployment is 9 per cent, compared to the official figure of 3.9 per cent. This rate peaks at 10 per cent as the furlough scheme ends in the upside scenario, 12 per cent in the central scenario, and 13 per cent in the downside scenario. So, for the people I represent in the communities of Islwyn, this is a frightening prospect.

The COVID-19 pandemic is not yet over and a second spike is deemed probable, and, as we look to the horizon, we now see an economic hurricane fast approaching, and it is my duty as the representative of proud Gwent Valleys communities such as Aberbargoed, Newbridge, Crosskeys and others to demand that the Senedd supports this Welsh Government in its determination to safeguard the people of Wales, and I also welcome today's funding announcements.

Opposition Members have previously remarked to me that they think 'austerity' is my favourite word, as I use it a lot, but it's because I despise the policies of austerity, because they were chosen out of choice and they have caused real harm and real inequality. The UK Tory Government of Cameron and Osborne have callously destroyed real lives in Islwyn for no return and for no benefit, and now marvellous magical money trees—whole forests—have now materialised. But what lies economically ahead now is a vast potential danger and harm to Wales. Through the 2008 recession, the largest quarterly shrinkage in gross domestic product was 2.1 per cent. In the three months to May, gross domestic product has shrunk by an incredible 19.1 per cent. Outside of this glowering unemployment data and the predictions due to C-19, we as a nation face also the very live and real issue of EU exit under 'no deal' terms ever likely and the predicted cliff-edge trade drop-off and parallel export tariff rises for Welsh business, all this leading to further predicted additional general downturn in both export and trade.

Despite the Welsh vigorous international trade discussion negotiation and exploratory talks, we still have heard nothing from the UK Government in regard to the shared prosperity fund for lost EU funds. Such serious macro-economic issues need an infrastructural mechanism for Wales to participate, as has been said, with parity of esteem, regularly and consistently within a mature inter-governmental devolved nation interface with the UK Government. This is still, very sadly, lacking.

As a member of the Senedd's Finance Committee, I welcome the transparent and frank way in which the finance Minister, Rebecca Evans, engages with the work of the committee and I also will applaud the effectiveness of the UK Government's employment subsidy schemes. And whilst I understand that the Chancellor has to plan for winding down the employment subsidy schemes, it is imperative that they are wound down when it is clear the virus is no longer a danger to public health. However, we cannot at all be certain that the pandemic will no longer be a significant threat in October, when the coronavirus job retention schemes end. We know what is probable.

I support the instincts and actions of the Welsh Labour Government that seeks an interventionist approach to support businesses, communities and individuals in Wales, as shown by the Welsh economic resilience fund and its second phase roll-out. It is encouraging to see that the UK Chancellor also intends to effectively replicate the Welsh Government's Jobs Growth Wales plan in his plan for jobs.

Acting Presiding Officer, on behalf of the communities of Islwyn, I urge the Welsh Labour Government to stick to its interventionist socialist principles to guide its draft budget and to hold to account the UK Tory Government to the scale of the real challenges that lie ahead for us all. With economic output only rising by 1.8 per cent in May, as opposed to the expected rebound of 5.5 per cent, it is no wonder economists like Thomas Pugh at Capital Economics are quoted as saying that there is a real risk that the nascent recovery will peter out in the second half of the year as unemployment rises and Government support fades.

Despite the most generous package of COVID-19 business support across the four nations of the UK, we in Wales are now staring in the face of some truly wicked issues of a 'no deal' exit and the post C-19 recovery. We also face, as has been mentioned, a substandard fiscal arrangement based on need with the UK Government and a lack of a mature interface with the UK Government. Wales and the UK need appropriate and mature inter-governmental mechanisms, and not ad hoc top-down sweeties thrown from the table, to tackle strategically the consequent levels of unemployment not seen in Wales since the 1980s. The Welsh Labour Government will continue to work—

Rhianon, you're over six minutes, so I think that is a natural conclusion. So, I call the Minister for Finance, Rebecca Evans.

I really welcome the opportunity today to look ahead as we consider how best to stabilise our economy and public services and reconstruct our society on a new basis, and I'm really pleased to have had this early opportunity to hear ideas that you know I will consider very seriously, and I know that we also share many of the same goals in securing Wales's recovery from this pandemic, and the digital survey conducted by the Finance Committee is a very important contribution to that debate.

Before I outline the considerations that are shaping our plans, we should acknowledge the extraordinarily difficult circumstances that we face and the scale of the financial challenge as we look ahead. We're in the deepest recession in living memory, with the labour market yet to see the worst impacts once the UK Government's furlough scheme comes to an end. It's now well evidenced that the pandemic is having a disproportionate impact. The scarring from unemployment alone could impact young people, the lowest paid, disabled people and people from BAME backgrounds worst.

We face the UK leaving the EU without a comprehensive free trade deal, which would be deeply damaging in normal circumstances, and anything less than a deal will compound pandemic damage and weaken public finances. We must also continue to respond to the climate emergency and the decline in biodiversity. The outlook for public finances reflects this context and, as Rhianon Passmore has said, the OBR's new fiscal sustainability report, published just yesterday, provides a really sobering reminder of the economic and fiscal challenges that we face. The report showed the UK is on track to record the largest decline in annual GDP and the highest public sector net borrowing in peacetime in at least 300 years. Rhianon Passmore described the situation as 'grim', and I wouldn't disagree with her on that.

While the Chancellor's statement last week included some welcome announcements, it didn't provide the significant boost for public services that we were hoping for, or the fiscal tools that we urgently need. Robust health, social care and local government services will be absolutely critical to a sustained recovery and this is a theme that is reflected in the Finance Committee's digital engagement and our own national survey. And, of course, Lynne Neagle set out extremely clearly the impact that the crisis has had on mental health, and those mental health services will need to be there for people as we come out of the crisis.

In terms of funding this year, I really have to set the record straight, and the claim that Wales has received an extra £500 million from the measures announced by the Chancellor last week is nothing short of misleading. The reality is that we will receive only £12.5 million in new revenue consequentials as a direct result of the measures announced in the economic update, and no additional capital funding. We have so far received around £2.8 billion in consequential funding from the UK Government, with a large part already committed as part of our initial response to the pandemic. We simply do not have enough money to do all of the things that we would like to do or even all the things that we'd planned to do. The scale of the financial challenge that we are facing will be a key issue for discussion at the finance Ministers' quadrilateral in the coming week, and I will also be pressing for clarity on the UK Government's plans for the long-promised comprehensive spending review.

In anticipation that we will not know our settlement for 2021-22 until late autumn, we have already signalled that it may be possible that we will not be able to publish our own budget until the end of the next term. I will write to the chair of the Finance Committee after the quadrilateral meeting to update on the consequentials we have received since the supplementary budget was tabled.

Turning to our early budget preparations, we are committed to building a prosperous Wales out of this pandemic. The Counsel General is bringing together our strategy for reconstruction and our preparations will align with this work, and you will have seen that the joint statement that was published yesterday by myself and the Counsel General set out the principles that will be guiding us. 

We'll be building on the foundation established when we set our plans for 2021 for a more equal, prosperous and greener Wales. We want to deliver a green recovery that will sustain Wales into the future, building on the £140 million capital package in decarbonisation and protecting our wonderful environment. And I know that this is a concern that the Chair of the Finance Committee has recognised this afternoon, and it's also been recognised very much by the people who took part in the committee's engagement.

I want us to find new ways of delivering capital investment in infrastructure to create jobs, building on our ambitious, Wales-wide investment plans, and I've heard this afternoon what Nick Ramsay has said in regard to some of those issues. My early listening to stakeholders more widely says that they want to see us continuing to focus on housing, and building on the £2 billion that we've already invested over this Assembly—over this Senedd term—on good quality, affordable housing, which is already invested in new social housing, alongside delivering the necessary energy efficiency retrofits within existing housing stock. 

I liked Mike Hedges's warning against making a budget for last year, and I think that so much has changed just in the past few months, hasn't it? The changes just since our budget just four months ago I think bear that out. Our economic resilience fund has already supported more than 9,000 businesses, and it's safeguarding over 77,000 employees' jobs. And I think that what I hear this afternoon is that colleagues want us to move this up into a new gear, with a focus on helping businesses, and particularly those in low carbon sectors, those that support our homegrown companies, in order to create and safeguard jobs, and you want to see a really strong focus on skills and employability, and you want to see us do everything that we possibly can to give young people the best possible chance.

As part of our engagement plans, we also will continue to ensure that there's a national conversation, which the Counsel General has already started, and that will help us inform the hard choices that we will no doubt have to make. It's already clear that we must go beyond business as usual and focus on change and innovation. Coronavirus has changed our world, and, at the end of the EU transition period, that will add to the upheaval. But we have an opportunity that is there for us to shape a recovery that is aligned to our values. And Rhun ap Iorwerth talked about the way in which the pandemic has changed the way in which we value things, and I'm really pleased that Welsh Government is a member of the network of well-being budgeting nations, and we're also seeking to influence the UK Government's work to review the UK Treasury's Green Book, and we want to see more of a focus on how we value—how we put value on social outcomes and environmental outcomes there. 

So, I'll be considering the points made today in shaping our plans, and will be really pleased to update Members on our progress in the autumn. Alun Davies referred to the decision-making process, and very shortly I look forward to launching a consultation on a potential finance Bill on tax legislation, which could be taken forward in the next Senedd, and I know that that's something that the Finance Committee has also expressed a particular interest in. Thank you.

Thank you, Minister. Before I call the Chair of the committee, I do have one Member who would like to make a short intervention. Huw Irranca-Davies.

Thank you, acting Presiding Officer, and I'd like to speak up for the humble footpath, because what people have discovered during the coronavirus, for all its challenges, is actually the joy of walking on their local footpaths. It really has helped with issues around mental health as well and mental well-being, and it'll be the same going forward. But, because of the years of austerity, between 2014-15 and 2018-19, the budgets for footpath maintenance have reduced by 22 per cent. We now spend 79p per person in Wales; we should we spending about £1. We used to be—we had the reputation of being the leader in terms of our maintenance of footpaths amongst all the nations. So, it's a small ask, but, in the country with the patron saint of small things that are very important, I would say to the Minister: in green infrastructure, in environmental spending, let's put the best foot forward and put the money into footpath maintenance for our local authorities and rights of way—it's good for mental health, good for so many things. Diolch yn fawr iawn. 

Thank you very much. It was worth waiting for. I now call on Llyr Gruffydd to reply to the debate.

Thank you very much, acting Presiding Officer, and may I thank everybody else who has participated? 

I was going to start by saying that this isn't a debate about a shopping list of investment items. But, of course, people obviously feel very strongly about various different fields. But, this debate is not a sort of extended letter to Santa Claus, as Alun Davies may have suggested at the outset.

This is an opportunity, of course, for us to consider that cultural shift from a situation where we’ve been distributing money and deciding how we spend money, to deciding how we’re going to generate funding and finance as well by raising taxes. That change will mean a change of mindset, as is happening in this evolutionary process that we are going through as a Senedd, but that also needs to be reflected constitutionally, perhaps in the way in which we introduce and present the fiscal process in a broader sense. And, of course, the committee has been looking at the legislative process around the budget, and that will be the subject of a report that will be published soon, and will obviously be the subject of discussions and debates in the autumn.

Sustainability. In Welsh, there are three Cs that have emanated from this debate. It might not work in translation. However, sustainability has certainly come through in almost all of these contributions; social justice has been prominent; and equality. I think that that message is a silver thread that must run through all the Government's considerations when it comes to preparing its budget, particularly in the context of the well-being of future generations Act and that change in interpretation, in the discourse around what truly represents value for money when we're looking at the way in which this Government spends its budget.

Mike Hedges is quite right in saying that COVID has changed everything. We know that. And as he said, last year’s budget is certainly not going to work this year. I acknowledge that investment in education, of course, is one of the most powerful tools that we have in addressing the economic recovery that we will need to stimulate after all that has happened.

It’s right to say that this pandemic has shown us what is possible when the political will exists to accomplish things, in the context of homelessness certainly. Who would have thought, if politicians had decided that we were going to address homelessness in the way in which it has been done over the past months, we would of course have arrived at where we are much sooner.

He ventured to get his crystal ball out and said that health would see the greatest increase in its budget, and perhaps the lowest level of scrutiny. Well, we shall see, we shall see, because perhaps that’s what’s happened in the past.

Rhun was right in reminding us of the role of local government and the need for a budgetary process that looks at well-being, which should be central to our considerations. And it then follows that we should consider some of the fields that Lynne Neagle referred to from the point of view of mental health and what’s happened to the mental health transformation fund. Certainly, this pandemic has intensified the need for support for mental health issues, never mind the economic downturn that will follow and make a difficult situation worse.

The level of the challenges that this pandemic has highlighted, the economic recession that will follow, and we’ve heard many times today about the challenges that will follow our departure from the European Union at the same time—all of these together mean that we need an extremely ambitious response from Welsh Government when it comes to setting its budget for next year. Every penny has to work as hard as possible.

I share Rhianon Passmore’s frustration when she alluded to how slowly the details regarding the shared prosperity fund have been coming out, which is of course a theme for us as a committee, and others have raised it here over the last couple of years. Because we know that the more assurance that we have on what the budget is, how much it is and what its intended purpose is, and the earlier that we get that information, then it stands to reason that the impact and influence of that budget will be much more effective.

The Minister was right to say that we live in extreme times and it’s quite exceptional in my view that the Secretary of State of Wales claims that an additional £500 million has come to Wales and that the Minister for finance in Wales is saying that, truth be told, it’s only £12.5 million of consequential revenue. The Secretary of State for Wales appeared before the committee earlier this week and we raised the point with him: 'Well, what does that tell us if you get two such contrasting interpretations? What does that tell us about the system that we have at present?'

And as Mike Hedges reminded us in the committee, the challenge is, 'Show us your workings', and not just to ask that of the Secretary of State, but to ask that of both Ministers. That is, we must move from there to a position where there is much greater transparency for the people of Wales as regards the impact of the consequential investments that come from London to Cardiff, and that is something that we all must work harder on.

However, whatever the level of the budget, there are difficult and hard decisions ahead for the Government in the ensuing year, and I hope that this debate has helped the Minister and the Government to weigh up those priorities whilst of course they prepare the draft budget.

Thank you very much. The proposal is to note the committee's report. Does any Member object? I don't see any Member objecting. So, the motion is therefore agreed in accordance with Standing Order 12.36.

Motion agreed in accordance with Standing Order 12.36.