The next item is the debate on the second supplementary budget for 2020-21 and I call on the Minister for finance to move the motion—Rebecca Evans.

Motion NDM7443 Rebecca Evans

To propose that the Senedd, in accordance with Standing Order 20.30, approves the Second Supplementary Budget for the financial year 2020-21 laid in the Table Office on Tuesday, 20 October 2020.

Motion moved.

Due to the exceptional circumstances of this financial year as a result of the coronavirus pandemic, I published this interim supplementary budget to provide an update on the Welsh Government's fiscal position. It ensures that the Welsh Government's financial position remains transparent. I'd like to thank the Finance Committee for its consideration of this budget and for the publication of its report and I'm pleased to note that it welcomes the transparency afforded to the Senedd in bringing forward this additional supplementary budget. I will provide a detailed response to each of the committee's recommendations in due course.

The purpose of this supplementary budget is to reflect the changes that have arisen as a result of the measures taken to respond to the immediate impact of the pandemic since the first supplementary budget was published in May. It includes allocations from reserves agreed since the first supplementary budget that relate to the acute end of the crisis, consequentials due as a result of UK Government announcements in respect of COVID interventions including the funding guarantee, and revisions to the land transaction tax forecast and block grant adjustment for stamp duty land tax, arising from the temporary changes to these taxes.

This supplementary budget increases the overall Welsh resources by £2.5 billion. This is a further 11 per cent increase on the position set out in the first supplementary budget some five months ago. Since the final budget was approved in March 2020, Welsh resources fro 2020-21 have increased by more than 22 per cent. In response to the immediate impact of the coronavirus pandemic, this supplementary budget allocates over £1.5 billion, including £800 million for an NHS stabilisation package to help the Welsh NHS to continue to respond to the impact of COVID-19.

We recognise the massive and unprecedented challenges the pandemic is having on our health service here in Wales. This funding will support NHS organisations across Wales to prepare for the anticipated challenges that winter will bring, responding to a second wave of the virus alongside normal winter pressures whilst continuing to further increase access to essential services. This funding takes the total amount of Welsh Government COVID-19 support for NHS organisations to more than £1.3 billion and £264 million has been allocated to support local authorities for the remainder of this financial year. This will meet the ongoing need for additional support in response to the pandemic, covering the additional costs, loss of income and the general financial position of local authorities.

Fifty-three million pounds has been provided for the cultural recovery fund to help support and sustain the sector during the ongoing challenges resulting from the pandemic, £113 million has been allocated to ensure train services continue to operate on the Wales and borders network for key workers and others who rely on the train to travel, and £50 million to support Welsh university and college students to provide skills and learning in response to the economic impact of the virus.

The focus of this budget is to ensure that the Welsh Government's financial position is transparent. Whilst we continue to respond to the impact of the coronavirus pandemic, it is right that I bring an update in the form of this supplementary budget before the Senedd at this time. We are the only Government within the UK to have published a second update to our in-year budget and to provide transparency of our funding decisions in this way. 

Of course, the fiscal position continues to change. On 6 October, I announced a further substantial package of funding, totalling £320 million, to help people and businesses to survive the challenging times ahead, when, only a few weeks ago, the UK Government announced a further increase of £600 million to the additional funding guaranteed for this year. I continue to carefully monitor our financial position, and will table a third supplementary budget, reflecting all of these changes, later in the year, and I ask Members to support this motion. 

Chair of the Finance Committee, Llyr Gruffydd. 

Thank you, Llywydd, and I'm pleased to contribute to this debate today on behalf of the committee. The committee met on 2 November to discuss the Welsh Government’s second supplementary budget for 2020-21. One of the things we do is to recognise that this supplementary budget is unusual in its timing, but, of course, as the Minister has already mentioned, we do welcome the transparency afforded to us in the Senedd by bringing forward this additional budget.

Many of our recommendations cover the issue of transparency. The UK Government, of course, has offered a funding guarantee. But when the UK Government makes new announcements, it's not clear whether these will lead to additional funding for Wales. Whilst there are clearly transparency issues with UK Government funding, we've also called for greater transparency from the Welsh Government, and have sought further details on a few specifics. First of all, more detail on funding for decommissioning the Dragon’s Heart Hospital; second, we've asked for breakdowns of funding provided to NHS organisations and claimed by local authorities; we've also requested details on the level of funding accessed by transport providers and expectations for further funding for the sector; and, fourthly, further details on the Welsh Government’s reserves to support COVID recovery and the end of the EU transition period.

Now, clearly, battling COVID is the immediate priority, but the end of the EU transition period is nearly upon us, and we must focus on this too. We need certainty over funding and we have pressed the Welsh Government to try and obtain details on the shared prosperity fund, and to have those details as a matter of urgency. 

Finally, the Minister stressed the need for end-of-year flexibility, and we fully support this request. We cannot predict the path COVID will take, and having flexibility, in terms of borrowing limits and reserves, would help the Welsh Government in its planning. Thank you. 

Thank you, Gweinidog, for your statement. The second supplementary budget allocates over £1.5 billion and sets out £1 billion of unallocated funding, as we saw on the Finance Committee. We do, of course, welcome—I know you've recognised—additional funding from the UK Government. Given your comments in Plenary on 6 October, that there did remain uncertainty over that level of funding, I wonder if you can confirm to us, Minister, whether there's greater clarity on that funding now, particularly in relation to the guarantee and particularly in relation to additional allocations for the pandemic.

We welcome recommendation 3 of the report, which asks for a breakdown of the £1.3 billion provided to NHS organisations for COVID-19 and a breakdown of the stabilisation package that you mentioned. You've previously said, or perhaps it's the health Minister who said, that the write-off of the NHS health boards' debt was dependent on them breaking even this year. I think I'm right in saying that. So, I wonder if you could confirm that we are on course for, at least this year, breaking even.

Can I ask you about the guarantee of funding for Wales? You said previously that it lacked transparency, but you were expecting some more details from the UK Government and the Treasury. Have you had any of those details yet? I'm pleased that the Treasury is now trying to help provide you with a bit more certainty. That was certainly welcomed and recognised as important by the Finance Committee, and I did like, to quote your phrase, that,

'the guarantee is a better problem than the one we had previously' which is a good way of putting it. I know that the guarantee does answer many questions, but, of course, it raises questions as well.

Turning to the biggest slice of the budget—health—the first supplementary budget increased allocations by £481.2 million compared to the final budget. I understand that this budget increases allocations by £901.5 million. I'd be grateful if you could confirm this. You're working with the health service, you say, to better understand the requirements for personal protective equipment. This is, obviously, with the pandemic, a very important aspect of the health budget at the moment. Do you have any specific figures? I know you're liaising with health boards, but do you have any specific figures about the allocations which are being provided for PPE at this time?

In terms of local government, on 17 August, the Minister announced additional funding of £264 million. There's now a further £306.6 million for the local authority hardship fund. How are you ensuring that this is fairly distributed and will be well spent by local authorities? I think that's an important thing for us to see.

And just finally, Presiding Officer, moving on to the issue raised previously about funding flexibility, and in response to the £1.2 billion UK Government guarantee. I appreciate the Treasury has not provided some of the budget flexibilities that you required, but you have received considerable amounts of funding, and I know that your requirement now to want to veer over capital and revenue funding isn't so necessary because of that additional support that has been received from the UK Government. You also have a range of fiscal tools at your disposal, more than ever before in Wales. Key to that is tax-raising powers. This does give you a certain amount of flexibility. So, do you recognise that, with powers does come accountability and responsibility, and flexibility isn't just something that needs to be provided at the other end of the M4 by the Treasury—it's also something that should be at the heart of the Welsh Government's budget-setting process? We are living in new times, with the pandemic and with greater powers. Let's look more at the flexibility that we have here in Wales to deal with some of the issues that we're faced with here. Diolch.

Thank you to the Minister for this afternoon's statement. This is an unprecedented year, of course, and I do realise and understand the pressures on Ministers and officials in dealing with fiscal issues in very difficult circumstances. May I also thank the Finance Committee for its report? I'm happy to endorse the recommendations made by the committee. Many of them are extremely important, including the need to improve the way in which information is shared on the budget at a time when the fact that the picture is changing so very rapidly and significantly can make it difficult to assess what's sometimes going on in terms of budget allocations. The committee is seeking clarity and a better analysis of a number of areas of expenditure from funding to local authorities, to funding to transport companies, and so on.

But there is also encouragement for the Government to continue to push for more freedom and fiscal flexibility and, as I've done on a number of other occasions, would give my support to the Minister in pursuing this issue further with the UK Government and the Treasury. This is something that I and Plaid Cymru have been emphasising regularly because we do believe that any normal nation should have that kind of flexibility, and I referred to it earlier today in my response to the statement on the mutual investment model. I don't think Wales as an independent nation, with the freedoms provided to independent nations, would need to use such a fiscal model at the moment given the favourable circumstances in terms of borrowing.

But to return to the present and this pandemic, having greater flexibility in terms of borrowing limits and in terms of using reserves is more important than ever now in terms of the ability to respond to the pandemic itself, but also to plan the recovery and the major investment that will be required for that recovery in time to come. And, of course, that lack of flexibility is reflected in the amount of unallocated funding included in the second supplementary budget.

What we have here is a Government that is uncertain in terms of its budget in future years, doesn't have flexibility to make its own decisions, and has to keep significant reserves, and if the Government knew that they had the ability to borrow, to carry funds over from year to year, then they could take a different approach to reserves in that scenario.

A few specific points on what's included, or rather what's not included: there are still sectors of business who cannot access support, particular pressures on businesses that can't operate at all and still face significant standing costs, and I would encourage the use of budgets to very carefully target those companies that are slipping through the net at the moment, including a number of hospitality companies who have a high rateable value, and are considered to be large companies, but in fact, they're relatively small, local companies, who haven't been able to access support to date.

To other issues not related to COVID—well, this is a COVID issue, actually—but there's no change in the allocation for the fuel poverty programme despite the fact that people will still have to self-isolate at home with the potential of seeing increased bills. Is this something that the Government has considered?

And one that isn't related to COVID: there is no additional funding for Natural Resources Wales for flood management specifically. We've suffered flooding in my constituency over recent years, and a number of other areas of Wales have suffered very badly over the last 12 months, including Rhondda Cynon Taff, and Conwy. Is there any intention to increase expenditure in that area in such a challenging year? I think people do need to know that the Government is doing everything it can to try and prevent those additional pressures on their communities that could emerge as a failure to manage flooding.

Can I thank the Minister for her statement? My second supplementary budget speeches for the last nine years have up until now been very similar, and also very short. The second supplementary budget traditionally dealt with small in-year changes, and very little has happened. That is definitely not the case this year.

Some general comments. I do not underestimate the difficulty in dealing with a budget in these difficult times. Not only for the Welsh Government, but also health boards, councils, and other public bodies like Natural Resources Wales. I welcome the transparency afforded to the Senedd in bringing forward this additional supplementary budget, and believe the approach of additional supplementary budgets in extraordinary years needs to continue. I am pleased that the Finance Minister was able to confirm in the Finance Committee that the money announced by the Westminster Government equated to the money expected by the Welsh Government, because we had some concerns initially that the Welsh Government and the Westminster Government were not talking about the same sums, but that has apparently now ended, and we are talking about the same amounts. That was obviously a cause for concern, because Westminster announcements need to be partly the same as the receipts by the Welsh Government. The agreement now makes budgeting much easier.

One thing I'm not convinced of is the Welsh Government having two reserves: the general uncommitted expenditure and the health reserve held by the health Minister. I would urge the Welsh Government to hold all uncommitted expenditure centrally. This is not about taking money out of health, or giving money to health; it's about transparency and knowing where money is and how it's being taken out. I remember those Members in budget debates in previous Senedd budget meetings, who would urge councils to use their reserves when they were needed. This is the bad time. I would argue now is the time reserves are needed in the councils, which ignored the previous advice, made the right decision. If they thought that was a bad time, I'm not sure what this is, but this would be an extremely very bad time.

Welsh Government needs to provide a breakdown of the funding claimed by each local authority against the additional funding the Welsh Government has made available. Also, a report on council projected reserves, excluding schools' delegated budgets, would be helpful, and an update on schools' delegated budgets and the number projected to go into deficit this year would also be helpful. And this is only anecdotal, but I know a number of schools in my own constituency who have concerns about going into a budget deficit during this year, because of all sorts of things that have happened over which they've had no control. I believe we will need of a third supplementary budget in the new year, possibly a fourth, to deal with things such as further details on any subsequent funding for track, trace and protect, particularly the protect element of the strategy, as well as further business support payments. It would be helpful to have a table of how reserves have been earmarked, in terms of what has been allocated to the COVID-19 reserve, what the unallocated reserves are, when they are likely to be allocated, and where the money is expected to be spent—e.g. is it on health, by health boards, or on economic support, or in other areas?

And what is available for the end of the EU transition period, and what has been considered to be the priority for this expenditure? A 'no deal' Brexit could cause serious problems to some areas of the Welsh economy, such as sheep farming. If farmers have European Union tariffs, that will have a huge effect on sheep farmers—tariffs would vary between about 30 and 60 per cent, so they would have very little European market. China, which is the biggest sheep market, as I mentioned last week—they have already got free-trade agreements with New Zealand and Australia, so we may well have serious problems with that.

And—it was mentioned earlier by Rhun ap Iorwerth—what reserves are in place in the event of another winter producing the flooding that we had this year? We are seeing climate change, we're seeing additional flooding. We've probably seen more flooding in the first 20 years of this century than in the first 50 or 60 years of the last century. We are seeing substantial flooding, so these will need to be dealt with.

These are difficult times, and I know there are always more claims than there are financial resources available—that's why we have a Minister for Finance. COVID has just made this all the more difficult. I support the supplementary budget, but, as I say, I don't expect it to be the last supplementary budget in this financial year, and I commend the Minister on the openness of bringing these supplementary budgets to us.

The Minister to respond to the debate—Rebecca Evans.

Diolch, Llywydd. This second supplementary budget is an important part of the budget process, but, as Mike Hedges says, it is a very, very different supplementary budget to the one that we would normally bring forward in a more regular year.

Following scrutiny, approval of this supplementary budget will authorise the revised spending plans of the Welsh Government and, crucially, it will allow cash to be drawn down from the Welsh consolidated fund to support that spending, so I thank Members for their contributions and for their support today. Some of the comments that I'd like to respond directly to relate to the supplementary budget and the fact that this is the second—.

Sorry, I can't concentrate, Llywydd, with the discussions going on on the—

Yes, I'm sorry.

—Conservative benches.

Two-metre distancing and chit-chatting doesn't work in the Chamber, so if you can refrain from doing so. Sorry.

Thank you, Llywydd. 

Minister.

Okay. So, as I was saying, of course, this supplementary budget looks back at the spending that has been undertaken. And I'm very keen to bring forward that third supplementary budget, to which some colleagues have referred, in order to be very clear about the additional spending that will take place throughout the rest of the financial year. However, we have a really important opportunity next week, when we have the spending review reporting on 25 November, to have those discussions about thinking forward for the budget for the future year as well, and certainly some of the contributions were very much along the lines of spend that we would like to see, and colleagues would like to see, happen in the next financial year. 

There were a number of comments and questions regarding our unallocated resources. The figures published in our extraordinary supplementary budget stand at levels before the announcement of the £320 million reconstruction package and the actions that we're taking for the firebreak. And I think this really does reflect the significant pace and scale of the changes that we're facing in responding to the pandemic and, alongside the decisions that we need to take in response to that on a very frequent and fast-paced basis, I'll be providing formal details on those in our third supplementary budget.

But responding to the point on provision of any further funding from reserves for other items of spend, for example, we've made some provision, should a further firebreak be needed, to be able to support businesses to a similar level. And of the £1.6 billion that has been unallocated, £924 million is held in the reserve that is created for the pandemic response, and, of that, we've already allocated £240 million, including funding for the firebreak, and the remaining balance is set aside for future costs associated with the pandemic. We have a further £280 million set aside for other revenue costs outside of the current plans, and our capital reserves within that £1.6 billion total £250 million, but, of course, we have already committed that balance to the pandemic recovery projects in the remainder of the year, and you will remember that I issued a statement on this fairly recently, and my colleague the Minister with responsibility for European transition has also made some comments on this in terms of the work he was doing on the reconstruction effort across Government.

So, just turning to some of the specific areas where there is a high degree of interest, one is the £800 million package of support for the NHS in order to help it stabilise and prepare for the anticipated challenges that the next few months will bring. You'll see that reflected in this supplementary budget, alongside £45 million for the COVID-19 contact tracing workforce, £22 million to meet adult care social providers' costs in relation to healthcare that they provide for the second six months of the year, and also funding to support unpaid carers, funding to support the childcare offer, and funding to support the new Cardiff and Vale COVID-19 facility to manage any potential increases there over the course of the winter.

And of course, all of that is reflected in the supplementary budget, alongside the additional funding for housing and local government, where I know there's also a great deal of interest. So, that includes £264 million for local authorities to support them for the remainder of this financial year, and it includes funding for, again, adult social care providers, funding to ensure that the local government hardship fund is able to meet the needs of local authorities, and funding to ensure that local authorities are not badly impacted by the impact of COVID-19 on council tax applications and the extension of the council tax reduction scheme to people who haven't previously been claiming for it.

So, those are several of the things that are reflected in this particular supplementary budget. This year, undoubtedly, is one of uncertainty, and the extra funding that we've received from the UK Government has been essential to help us deal with the immediate response to the crisis, but we do need consistent and sustained investment above existing pre-COVID levels to deal with the long-term impacts of the pandemic on services, businesses and individuals, and the UK Government will have the opportunity to provide that in the comprehensive spending review next week.

I've been really clear as well that our response to the pandemic is not just an immediate response to the direct health harms caused by the pandemic itself, but it's also about alleviating the wider impacts caused by the unprecedented social and economic measures that we've taken to protect people's lives and reduce the spread of the virus. A significant focus of the action that we've taken has been on preventing harm to the most disadvantaged and preventing wider negative impacts on the people of Wales and the wider economy. We've evolved and collaborated across the public services, the private sector and the third sector at pace in developing and delivering the interventions to respond to this pandemic.

The First Minister has also outlined, given the speed at which things can change and the nature of the virus that we face, that we can't offer any kind of guarantee as to what the future might hold. But what we can say is that the economy is now in one of the deepest recessions in living memory, with uncertainty over the shape and the pace of the economic recovery and a lack of clarity over future trading relations with the European Union impacting on people and businesses. Public services in Wales are still responding to the pandemic, as well as now facing longer term impacts, so it's really imperative that the UK Government continues its substantive fiscal and economic interventions using its macro-economic levers, including welfare benefits, taxation and support schemes. The UK Government should continue to borrow while interest rates are lower than before the crisis, and are actually lower than the rate of inflation, because it's the only way to protect the economy's capacity to produce the goods and services that we need to emerge from the crisis.

So, Llywydd, the measures in this supplementary budget are by no means the end of the story. As I said, last month I announced an investment package of £320 million for projects and schemes over the next six months to maximise the impact of our available resources this financial year to support our recovery, and those, of course, include our support for young people, who were so badly affected by the lockdown, including additional catch-up support for learners in years 11, 12 and 13; capital investment, for example in low-carbon housing, schools and primary care, to create and safeguard jobs, deliver homes and better public services; and tackling inequalities, particularly in respect of BAME people who have been severely impacted by COVID-19. So, we will continue to closely monitor and assess the position in Wales, and I will bring forward that third supplementary budget before the Senedd before the end of the financial year.

The proposal is to agree the motion. Does any Member object? [Objection.] There are objections, and I will therefore defer voting until voting time.

Voting deferred until voting time.

We will now take a short break whilst there are changeovers in the Chamber, and we will recommence in a few moments.

Plenary was suspended at 18:55.

The Senedd reconvened at 19:02, with the Deputy Presiding Officer in the Chair.

So, we move to the proposal under Standing Order 12.24 to debate agenda items 10 and 11 together, but with separate voting. In accordance with Standing Order 12.24, that's what I propose. I don't see any objections. Does any Member have any objection? No. Therefore, we will, as I say, debate the two regulations but vote separately.