5. Statement by the Minister for Finance and Trefnydd: Update on fiscal impacts of COVID-19 and future budget prospects

Part of the debate – in the Senedd at 4:30 pm on 6 October 2020.

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Photo of Rebecca Evans Rebecca Evans Labour 4:30, 6 October 2020

Thank you, acting Presiding Officer. Today, I am providing Members with an update on the fiscal impacts of the COVID-19 pandemic and our future budget prospects. Our efforts are focused on responding to the impacts of the pandemic and setting the foundations for reconstruction with new support for jobs, young people, communities and our environment.

The Chancellor’s decision to cancel the UK autumn budget, the uncertainty surrounding the UK comprehensive spending review and the lack of information on replacement EU funding all contribute to making our task harder. Together with my counterparts in Scotland and Northern Ireland, who are also making statements to their respective legislatures today, we are setting out our joint requests to the UK Government for greater fiscal flexibilities, meaningful involvement in the spending review and a fair deal on EU replacement funds.

We have now allocated almost £4 billion in response to the impact of the pandemic. This has been drawn from consequentials from the UK Government as well as £0.5 billion from the COVID-19 response reserve that we created through repurposed budgets. Since the supplementary budget, we have allocated £260 million in additional funding for local authorities and an additional £800 million stabilisation budget for the NHS, as well as support for wider priorities from public transport to arts and culture.

Today, I am pleased to announce a further substantial package of funding totalling £320 million to help people and businesses to survive the challenging times ahead. We are investing in the reconstruction priorities outlined just now by the Counsel General and Minister for European Transition to support a values based recovery. Together with the major investment in businesses and skills within the economic resilience fund, these measures provide a significant investment in our reconstruction efforts.

My ministerial colleagues will set out further details in the coming days and weeks, but I can confirm that the action we will take to support children and young people will include £15 million to help more learners in further education with the digital tools they need, at the same time as boosting enrolment capacity to support young people through the economic shock. A further £9.5 million will help those in years 11, 12 and 13 with additional catch-up support at this crucial time in their education.

A further £60 million will be dedicated to support a step up in the construction of council and social housing. This action will help to boost jobs, with investment in low-carbon housing, greater energy efficiency and efforts to reduce fuel poverty. And £14 million will support measures to respond to the climate emergency by pursuing our strong decarbonisation agenda, managing our land for the benefit of rural communities and future generations, and protecting natural resources. This major investment demonstrates how our approach to reconstruction will be guided by the Well-being of Future Generations (Wales) Act 2015, and in particular the importance we place on early intervention to prevent problems in the future.

While this action is essential to our recovery, only the UK Government has the macro-economic levers required to reignite the economy. I remain greatly concerned that the job support scheme includes an arbitrary definition of what a viable job is, which will only worsen the difficulties for those who are hardest hit. Together with counterparts in Scotland and Northern Ireland, I am today urging the UK Government to do more to support the businesses and sectors that are hardest hit; to do more on skills and more on job creation for young people; and to continue with additional universal credits, due to run out in March, which have helped some of the poorest families weather the storm. The UK Government must also do more to provide extra support to individuals and businesses in local lockdown areas.

There remains uncertainty about the level of funding that we can expect this year. While I welcomed the UK Government’s guarantee that I was able to negotiate in July, there have since then been several announcements of further funding in England without clarity about the implications for us here in Wales. We rightly expect our fair share of new funding announcements by the UK Government, but we have currently no way of judging whether or not we're receiving it.

This backdrop makes the case for greater fiscal flexibility all the more urgent. There are three main new flexibilities we require: (1) the ability, if we need it, to overspend this year, up to a limit that we can agree with the UK Government; (2) the ability to carry forward more in the Wales reserve at the end of the financial year; and (3) enhanced access to the resources in the Wales reserve in 2021-22 for both revenue and capital. Together with my counterparts, we are collectively asking the UK Government today to provide the full suite of flexibilities that we need to manage the challenges that we're facing.

The cancellation of the UK autumn budget and the uncertainty surrounding the comprehensive spending review has major implications for our budget process. At present, I intend to publish our draft budget proposals on 8 December and the final budget on 2 March 2021. However, this timetable is heavily dependent on when we receive details of our settlement for future years and the conclusion of the spending review. While I continue to press on with our draft budget preparations, without a UK Government budget I am having to make assumptions about the block grant and use provisional information on the block grant adjustments. So, together with my counterparts, we are collectively asking the UK Government today for urgent clarity around the scope and the timing of the spending review.

We also face the continued uncertainty regarding the UK Government’s approach to the end of the EU transition period. We continue to press the UK Government for more clarity about how it will deliver on promises that Wales will not be worse off as a result of Brexit and that devolution will be fully respected. Replacement funds will be integral to our recovery, so their delivery must be fully devolved so that we can target them to meet the specific needs of people, communities and businesses in Wales.

The United Kingdom Internal Market Bill serves to undermine this, and we will do all we can to resist this power grab and the race to the bottom that it represents. For this reason, together with my counterparts, we are collectively asking the UK Government today for assurances that it will provide full replacement funding of EU programmes without detriment to the devolution settlements. We also require a fair share of funding for new functions that will fall to Wales and that will help us to support a smooth transition as we exit the EU.

So, to conclude, it is imperative that the UK Government acts on the collective calls we are making today to provide the flexibilities and the funding needed to enable us to respond to the challenges effectively. In the meantime, the Welsh Government will continue to work tirelessly to build a more prosperous, more equal, and a greener future for Wales, and this is underpinned by the significant investment that I am announcing today.