Questions now from the party leaders. Andrew R.T. Davies, leader of the Conservatives. 

Thank you, Presiding Officer. First Minister, you've previously said that your Government will not raise Welsh rates of income tax until at least the economic impact of coronavirus has passed, but you've also said that you will not rule out a rise in taxes before the end of the Senedd term. Will you be raising income tax at some point during this Senedd term?

Well, the Member will have to wait to see. As we said in our manifesto, it will depend on the circumstances. While the economy is recovering, there are no plans for this Government to raise taxes in Wales, because we know that the recovery depends on making sure there's effective demand in the pockets of Welsh citizens to go out there, spend money and help with the economic recovery—the economic recovery that is underway, Llywydd. There are encouraging figures out today on employment rates in Wales that demonstrate that that recovery is underway here.

What lies beyond the recovery can only sensibly be decided in the circumstances that we will face when we get there. The Member will understand that in the last 15 months we have gone through a period that none of us could have anticipated even 18 months ago, yet he invites me to make decisions today for what will happen years into this Senedd term. It's not a sensible thing to do and I won't be doing it.

I think it's a perfectly reasonable question, seeing as your programme for government does touch on income tax rates and whether the Government will use them or not. Also, what's talked about are particular levies or surcharges for social care or, indeed, education, which was highlighted on the weekend by an academic here in Cardiff.

You have to pay for services someway, either through taxation or through levies or surcharges. So, what is your preferred route then, First Minister? If you're not prepared to give an indication of what you're likely to do with Welsh income tax, do you believe that there should be a sector-specific surcharge on social care or, indeed, on education, to help fund education, with the deficit that we know exists in the education budget?

Llywydd, my preferred route to paying for services in Wales is to grow the economy so that there are more buoyant receipts from an economy so there is a bigger cake for us all to be able to use to pay for services. So, that's where I start. I don't start, as he does, with asking about taxation; I begin by asking the questions about what we can do and what contribution the Government can make to growing the Welsh economy and providing, therefore, the investments that are necessary. There is no mention in my party’s manifesto of a levy for education, and that has no part in this Government’s plans. We did, in the last Senedd term, when we debated it extensively here, work on the Holtham proposals for a social care levy to help pay for the demographic changes that we are going to see in Wales. All of us here know that the future in Wales is of an ageing population, we have a higher proportion of our population over 65 than any other part of the United Kingdom, we’re the only part of the United Kingdom where people move into Wales at the age 65 to retire, and we have to think together about how that is to be paid for in the future. The Holtham proposals for a levy were a serious contribution to that debate, and we’ve done a lot of detailed work to see how that might work.

It will only be able to work when we know the proposals of the UK Government, signalled, briefly, in the Queen’s Speech, and promised by UK Ministers before the end of this calendar year. Then we will be able to see the interface between any proposals of the Holtham variety, or other ways of paying for social care, and the benefit system, which remains reserved to the United Kingdom. Only when we can see all parts of that complex jigsaw will we be able to make the most effective decisions about the way Welsh money can be used to pay for the social care services we will need in the future.

Well, First Minister, you will not indicate your use of income tax powers. You have indicated more clearly in your second answer the use of a social care levy, surcharge—call it what you will—and ruled out an education levy surcharge, which I’m grateful for you doing that. But one thing your programme for government does talk about is a tourism tax and actually consulting on the legislative proposals that such a measure would require to be brought in here in Wales. Can you indicate to me how you believe such a measure would help the tourism sector here in Wales when we know that high taxation actually impedes economic growth? I start from the position of low taxes encourage economic growth because they encourage people to go out, take the risks, take the challenges, and grow that economy. But your programme for government clearly indicates that you’re going to bring in a tourism tax, so how on earth will that help a vital sector of our economy repair itself after the COVID crisis?

[Inaudible.]

Indeed. Well, Llywydd, I look forward to bringing forward proposals for debate here in the Senedd on a tourism tax, an idea, as I heard my colleague Mike Hedges say, that has taken root, and very successfully, right across the globe, and has been put forward by a series of local authorities of very different political persuasions in recent times. Whether it’s a Lib Dem-controlled Bath and North East Somerset Council, whether it’s a Labour-controlled Liverpool City Council or whether it’s a Tory-controlled Aberdeen City Council, there are proposals for tourism taxes at that level, and that is what the proposal in my party’s manifesto is about. It is about giving the power and the authority to local authorities in Wales to make a decision for themselves as to whether or not a tourism levy would allow them better to go on investing in the circumstances that make those areas attractive to tourism.

I’m very clear in my own mind, Llywydd, that a tourism tax, properly done, will benefit the industry because what it will allow those local authorities to do is to invest in the things that make those areas attractive to tourists in the first place. At the moment it is those local resident populations who pay for everything. They pay for the toilets, they pay for the car parks, they pay for the local museum, they pay for the local festival—anything that is put there to attract people into the area, it is those local residents who bear the cost in full.

A tourism levy, charged on people who choose to go to those areas, in a very modest way, when you add it all up, could be a significant opportunity for local authorities to invest in the conditions that make tourism a success. Where local authorities don’t believe that it would be a tool that they would seek to use, they’d be under no obligation to do it, but I’ve had many encounters on the floor of the Senedd with the leader of the opposition when he urges me to devolve—not simply to Cardiff, but onwards to local authorities to strengthen their ability to make decisions for their local populations—and that is what we will bring forward when we talk about a tourism tax. More powers for local authorities to make decisions that are right for their local areas and populations.

On behalf of Plaid Cymru, Rhun ap Iorwerth.

Thank you, Llywydd. In the words of the Minister for Climate Change, Wales needs to do twice as much to tackle climate change in the next decade as it did in the previous 30 years. Last year, the Climate Change Committee that advises UK Governments said that the absence of a clear strategy for the whole economy for 2050, at Welsh and UK Government levels, means that Wales is not on the road to reaching the target of 80 per cent, never mind net zero. If we look back, emissions have dropped by 31 per cent in Wales since 1990, as opposed to 41 per cent across the UK. Why do you think Wales is falling behind?

Well, Llywydd, it's because we've taken seriously a number of the points that Rhun ap Iorwerth has made. That's the reason that we have been able to create a new Minister and department with the responsibility to tackle climate change; a Minister with the powers in housing, energy, transport, and the environment too. Therefore, the UK committee will publish the latest report on Wednesday, as I know, Llywydd, that you are aware, we as a Government don't usually put items down on the agenda for Wednesday, but we have put a statement down on the agenda for tomorrow, to give an opportunity for Members to hear from the new Minister about her plans and about the response of the Government to the committee and the latest report.

I welcome the fact that there is a Minister for Climate Change. I listened to her first interview on the BBC, and there was a great deal of talk about transport and roads, and the First Minister will know that I'm very eager to encourage a shift towards electric vehicles and so on. And that's all important, but buildings use more energy than transport.

If we're serious about tackling climate change, we have to be serious about tackling energy use in buildings. And to cut emissions from heating in domestic premises, we have to replace fossil-fuel burning boilers and we have to invest in energy efficiency, and given that the majority of the housing stock—the vast majority of the housing stock in 2050—will be the inefficient housing stock that we have today, when are we going to see work beginning in earnest and at scale on the kind of retrofitting of heating and insulation needed to get us to where we need to go?

Well, look, I entirely agree, Llywydd, with the points that Rhun ap Iorwerth is making about the vital importance of a retrofitting programme. The Welsh Government will bring forward such a programme. We will invest significant sums in it, because the energy that is given off by the houses we live in is one of the major challenges we face. It is also why we are so determined that the 20,000 new social rent houses that we will build will be houses that will generate as much energy as they use. And the investment that we made in the last Senedd term, in our innovative housing programme, has given us some really vital experience and information that we can use, with real-life examples of housing being built in Wales, that does exactly that—generates more energy than it consumes. Then that has given us a really solid platform from which we can build the sort of houses of the future that will contribute to the effort to address climate change, rather than being another drain on it.

It's perhaps worth looking a little closer at what you mean by 'significant sums'. I think your Government last November said you wanted, between now and 2050, to decarbonise 1.4 million homes. I think my sums, if they're right, say that's 132 homes every day for the next 29 years. Perhaps you can tell us how many Welsh homes were decarbonised last year, because from where I'm looking, it feels as if we're at a bit of a standstill.

Retrofitting, of course, is an investment; it's an investment in the environment, but it's an actual investment also in making savings through energy efficiency. It could create tens of thousands of jobs. It's exactly the kind of project that could attract investment—real financial investment—through Government bonds, for example, and Plaid Cymru has talked of maybe a multi-billion pound scheme over a period of time, financed in that kind of way.

Now, your Government has had to admit that the £20 million invested in the optimised retrofit programme is, and I quote:

'not…going to come anywhere close to decarbonising Welsh homes.'

Well, you can say that again. So, First Minister, it's more than two years now since the declaration of a climate emergency, we're something like 7 per cent of the way to 2050 already, so when will you put the financial model and the detailed strategy in place to begin retrofitting at pace, because the clock is ticking and the emergency is deepening?

Well, Llywydd, again, I don't demur for a moment about the urgency of the crisis that we are facing. The Cabinet met yesterday and agreed a proposal from the finance Minister as to how we will create the budget for next year over the summer and bring proposals to the floor of the Senedd in the normal way in the autumn, and that will be the way in which we will create the budgets that we need for the many, many different demands that there are on our public services. The one thing we will not be able to use, Llywydd—and I've had this discussion with the leader of Plaid Cymru in the last Senedd—is Government bonds, because Government bonds do not add a single pound to the spending capacity of the Welsh Government. All they offer you is a different stream of funding to the funding streams we have already, and they don't add to it. They're just a different way of funding, and, actually, a more expensive way of funding, much of the expenditure that we use. But, in the system that we have, for every pound that you raise through a Welsh Government bond, you lose a pound of money that comes to us in capital expenditure from the UK Government. So, it's not that they are a bad idea in themselves, and we've taken some steps to be able to create to Welsh Government bonds, were they to be cheaper than borrowing money from the UK Government. But what they don't do is to add to the total amount of money that you can spend, and therefore they're not an answer to some of the challenges that Rhun ap Iorwerth has quite properly raised this afternoon. The sums of money that we have, for the purposes for which we are responsible, are fixed through the Barnett formula and the decisions that the UK Government make. I hope that the UK Government will be true to its commitment to climate change and everything that was said in Cornwall last week and in preparation for COP26. Then we will see the flow of investment through to Wales that will allow us to do more and to do more things more quickly, just as we would like to do.