I am pleased to open this debate this afternoon on the Welsh Government's draft budget for 2021-22. Since we first had the opportunity to debate the draft budget in the Senedd, the Finance Committee and other Senedd committees have scrutinised our spending plans. Given the unprecedented circumstances we have faced, I would like to place on record my gratitude to the Finance Committee and the other committees for their co-operation in conducting scrutiny in a truncated period. 

Before I provide early reflections on the key themes arising from scrutiny, I want to outline the latest assessment of the context shaping our budget preparations. While a 'no deal' outcome has been avoided, the agreement with the EU creates new trade barriers for Welsh businesses, a loss of rights for Welsh citizens and a smaller Welsh economy by up to 6 per cent over 10 to 15 years, according to independent experts. Alongside the pandemic, this results in a weaker economy and worsened fiscal prospects for Wales. We agree with both the Organisation for Economic Co-operation and Development and the International Monetary Fund that it is not appropriate to tighten fiscal policy in the short term, but the UK Government's approach on this and rebuilding public finances remains unclear. The climate emergency also continues to pose a significant challenge. While the Committee on Climate Change has noted significant costs will fall to the private sector, it is inevitable that there will be public spending implications.

The disappointing budget settlement from the UK Government's single-year spending round and broken promises on post-EU funding have also left us worse off next year, with the risk of eleventh-hour UK Government decisions continuing. I welcome the Finance Committee's recognition of the ongoing issues of the UK Government's chaotic approach to its budget timetable and the significant and unreasonable impacts that this has had on our own budget preparations. I also welcome the calls from the committee to the UK Government to grant us the necessary flexibilities to allow us to manage our budget in the most effective way for Wales. 

It is hard to see a time when the need for these additional flexibilities would be greater, which has also been supported by independent calls for these flexibilities by the Institute for Fiscal Studies and the Wales Governance Centre. I will continue to press the UK Government to provide Wales with the fairness, flexibility and clarity we need, including on post-EU farm funding, the shared prosperity fund, flooding and coal-tip remediation. I will also not let this difficult context distract from our steadfast commitment to provide transparency to support meaningful scrutiny of our spending proposals. We will look to build on the additional steps we have taken this year to provide full transparency and to continue these measures into the year ahead. This includes providing an update at the earliest opportunity, following the UK Government's 3 March budget, which is the day after we publish our final budget. In this context, we're focused on where we can have the greatest impact, balancing the need to retain flexibility into next year. I am proud that we have maximised our available funding to protect what matters most, and pursue the change that is not just possible, but essential.

Our preparations have been guided by our eight reconstruction priorities, shaped by more than 2,000 public responses and leading Welsh and international experts. This ambitious plan focuses on our short-term priorities, alongside providing the foundations for our longer term recovery.

We are investing in employment and the labour market, including a £5.4 million boost for personal learning accounts to help workers on low incomes upskill and retrain. We're investing in our young people, disadvantaged groups, and in education, including the £176 million we are providing to local authorities, £8.3 million for curriculum reform, and £21.7 million for HE and FE demographic pressures. We're investing in housing with £40 million for the housing support grant to achieve our ambition of ending homelessness and £37 million of capital funding to support the building of affordable and sustainable homes. We're investing in town centres, including an additional £3 million to support our high streets and town and city centres, and £5 million to support our wider regeneration activities through our town centre loans programme. And we're investing in our climate, land and natural resources, building on the significant £140 million capital package we provided in 2020-21, including an additional £5 million for biodiversity and the national forest, and an extra £26.6 million for the circular economy to improve recycling in Wales and address social inequities. We're investing in working and travel, including an additional £20 million for active travel projects, and a total of £275 million in our rail and metro. We're investing in our foundational economy and Welsh businesses, including a further £3 million to provide a foundational economy fund to support the rapid spreading and scaling of good practice, and to provide jobs at the heart of our local communities. We're investing in our NHS, providing an additional £420 million for health and social services to support the NHS's growth and post-pandemic recovery.

I also welcome the Finance Committee's recognition of the positive steps we have taken on climate change and reforms to our budget and tax processes. Through our budget improvement plan, we have already outlined how we intend to take forward these reforms over the next five years, and I welcome the ongoing engagement on this important agenda. I was also pleased that the Future Generations Commissioner for Wales in her scrutiny has welcomed our continued commitment to combating climate change, our investment in town and city centre regeneration, and our investment in housing and homelessness. I look forward to continuing to work with the commissioner as we take forward our ambitious plans.

I welcome the committee's recognition of the importance of funding health and local government; as I've previously outlined, these are areas at the forefront of my considerations for COVID-19 funding at the final budget on 2 March. I am also considering the other areas raised by the committee; I and my Cabinet colleagues will respond formally to the recommendations of the Finance Committee report and other Senedd committee reports in advance of the vote on the final budget on 9 March.

So, to conclude: confronted with the most challenging circumstances we have faced since devolution, I am proud that this draft budget not only provides a solid foundation for the next administration, but protects, builds, and changes to deliver a more prosperous, more equal and greener Wales. Diolch.