This certainly is very much a draft budget. A lack of forward funding figures, with only a one-year revenue funding settlement, has made budget-setting work even more challenging. Additionally, the Welsh Government is holding significant unallocated reserves of around £800 million. The UK Government’s budget is set for 3 March 2021, meaning that the Welsh Government’s final budget will not be able to reflect its content, so we can be sure of significant changes to allocations during the year. Therefore, we recommend that the Minister outlines the implications of the UK budget as soon as practicable.

For some time, the committee has been concerned about the mechanism and transparency used by the UK Government to make funding decisions, with the Minister saying that the level of engagement at a ministerial level between the Treasury and the Welsh Government has been 'poor'. During 2020-21, large funding consequentials were made in-year. There have also been problems with the transparency of these consequentials and how they are calculated. This has resulted in the committee having limited information regarding additional funding and conflicting statements from the UK and Welsh Governments. We recommend the Welsh Government continues to seek commitments from the UK Government that UK fiscal events will normally take place by a specified date and that multi-year funding settlements will be reinstated in time for next year’s budget process.

The Minister told the committee how budgetary decision making has changed during the pandemic, with Ministers meeting frequently to address key issues as they arose. The committee welcomes the efforts that the Minister has made to manage the prioritisation process more centrally this year. However, we believe that the Welsh Government needs to have systems in place to ensure that when consequentials are received, it can prioritise and deliver funding quickly and effectively.

We welcome the approach taken this year, where changes to Welsh taxes have been made as part of the draft budget, given that tax changes are linked to spending commitments. This Senedd voted on three sets of tax regulations on 2 February. However, we believe it would be more prudent for the budget and tax resolutions to be considered at the same time.

There have been a number of challenges as a result of COVID-19 and the financial impact on health and social services has been significant. We welcome the uplift for health, which reflects the important role that the NHS plays in responding to the pandemic. The Minister has confirmed that nearly £700 million of the unallocated reserve is in relation to COVID-19 and that she does intend to make additional allocations between the draft and final budgets.

It is not clear how much resource has been identified for the pay rise for NHS staff and, as a result, what additional funding will be available to respond to the pandemic, as well as non-COVID services. We have recommended that the Welsh Government provides further information about how the additional £385 million funding for core NHS services will be used, including a breakdown to show how much has been set aside for the pay award for staff and other services.