The next item is a debate on the first supplementary budget 2021-22. I call on the Minister for finance to move the motion—Rebecca Evans.

Motion NDM7726 Lesley Griffiths

To propose that the Senedd, in accordance with Standing Order 20.30, approves the First Supplementary Budget for the financial year 2021-22 laid in the Table Office on Tuesday, 22 June 2021.

Motion moved.

Diolch, Llywydd. This first supplementary budget of 2021-22 once more focuses squarely on the Welsh Government's response to the pandemic. It regularises the important allocations that the previous Welsh Government made to help us and our partners respond quickly and effectively to the impact of coronavirus. It also provides an opportunity to make technical changes that restate the budgets of the Welsh Government in line with the new ministerial portfolios arising out of the new administration, as well as reflecting adjustments from recent UK fiscal events.

This budget increases the overall Welsh fiscal resources by over £1.1 billion, with a 5 per cent increase on the position at the final budget. Our fiscal spending plans have increased by a total of £793 million, an increase of 4.1 per cent since the final budget. This budget includes over £700 million of allocations to departmental budgets, and £627 million are allocations from the COVID-19 response reserve. A key priority has been to support our NHS and its workforce as it continues to experience unprecedented strain caused by the pandemic. For this, the Welsh Government has provided additional funding of £100 million to be used across primary, community and secondary care. To support the Welsh economy, we have allocated £352.2 million to extend the business rates holiday for the retail, leisure and hospitality sectors, support that will extend to the end of this financial year, some six months longer than the equivalent relief provided in England. We have provided £55 million to help businesses as they prepare for more normal trading conditions.

We have provided over £39 million for the continuation of the Recruit, Recover and Raise Standards programme to support teaching and learning, with a particular focus on support for the most vulnerable and disadvantaged learners. A further £19 million has been allocated to ensure children continue their learning progress following disruption during the pandemic, with a focus on the well-being of children and staff. An allocation of £33 million has been made to further education and local authorities to support learners in colleges and sixth forms to fund additional teaching time, and £6 million has been allocated to support 1,400 trainee teachers currently in initial teacher training to complete their qualifications and move into full-time teaching.

Access to leisure, recreational, sporting and cultural events for children and young people is critical in the recovery from the effects of COVID-19. This is why we're providing an extra £4.5 million to local authorities to stage activities as part of the Summer of Fun. And we're allocating £2 million to the residential outdoor education sector for support to cover essential operating costs. The cultural recovery fund has provided vital assistance to individuals and to a sector facing decimation had the Welsh Government not stepped in to provide vital support. That is why we're allocating £30 million to extend the fund and support Wales's diverse culture through the challenges that they face. 

In order to support Transport for Wales to meet the operating costs of the rail network from September until the end of November, we have allocated £70 million. And a further £100 million has been allocated for non-COVID-related measures, such as the exciting new international learner exchange programme, vital support for Cardiff Airport and allocations relating to transfers from the UK Government. 

I welcome the Finance Committee's recognition of the ongoing difficulties caused by the UK Government's lack of clarity regarding policy decisions that have funding implications for Wales. This uncertainty has a detrimental impact on our funding settlement, placing us at a perennial disadvantage when planning and managing our budget. I continue to press the UK Government to provide greater fiscal flexibility with borrowing and the Wales reserve. 

Against the background of the pandemic, it is imperative that our calls are recognised to support effective financial planning to enable growth and recovery. I thank the committee for its consideration of this budget and the publication of its report. I'll provide a detailed response in due course, but I am minded to accept the recommendations. I continue to work with colleagues to identify pressures related to both the pandemic response and opportunities to fund COVID recovery measures, and will be making further announcements in due course. All further allocations will be regularised in the second supplementary budget later this year. I ask Members to support the motion. 

I call on the Chair of the Finance Committee, Peredur Owen Griffiths. 

Thank you, Llywydd. I'm very pleased to speak in this debate today on behalf of the Finance Committee. The committee undertook scrutiny on the first supplementary budget on 2 July. I thank the Minister for her attendance and also I thank the Members for meeting at short notice to do that work.

This supplementary budget shows an increase in allocations to Welsh Government departments of £1.2 billion. That's an increase from £19.7 billion to £20.9 billion. The allocations are mainly based on the Welsh Government’s continued response to the pandemic. The Minister told us this is a technical supplementary budget moving back in step with previous ways of budgeting. However, the three supplementary budgets in the last financial year provided detailed information. We recommend that future supplementary budgets provide more detail on how new allocations have been prioritised to ensure that transparency is maintained 

We were pleased to hear the Minister had continued to meet frequently with other Ministers to discuss funding requirements, taking a more centralised approach to budgeting. The Welsh Government is holding a significant level of unallocated fiscal resource in reserve. We understand the need for flexibility to deal with the response to the pandemic and note that the Minister does intend to make some significant allocations shortly. We look forward to considering them as part of the second supplementary budget.

The Minister said the UK Government’s funding guarantee last year was really helpful in providing some certainty for devolved administrations. However, we heard significant issues persist regarding how the UK Government communicates policies that result in consequentials for Wales. Communication between Westminster and Wales was an issue of concern for the previous Finance Committee. We intend to pursue closer working with other counterparts to collectively apply pressure on the UK Government to provide clarity on funding decisions. We also recommend the Welsh Government continues to press the UK Government to improve transparency in funding calculations and for more effective inter-governmental mechanisms and governance structures than those currently in place.

As has been the case throughout the pandemic, the Welsh Government has allocated significant funding to economic support. The largest allocation in the supplementary budget is £352.2 million to extend the retail, leisure and hospitality business rates relief. The committee welcomes that the full rate relief for businesses in Wales will apply for the remainder of the year, unlike in England.

Moving on to transport, the Welsh Government wrote off £42.6 million of the loan it had given Cardiff Airport. We heard that the previous Minister for the economy and transport had shown the write-off was the most cost-effective way of supporting the airport at that point. However, the Welsh Government used financial transaction capital funding for some of the loan it provided to the airport, and is required to pay back 80 per cent of the total financial transaction capital allocated by HM Treasury. We recommend that the Welsh Government provide information about the financial impact of its decision to write off part of the loan.

An additional £100 million has been allocated to supporting the recovery of the NHS. The Minister suggests that this funding would also support NHS organisations to respond to a potential third wave. We recommend that the Minister clarifies the purpose of the £100 million, including how the funding will be used, its intended outcomes and how the Welsh Government will monitor and report the impact it ends up having on NHS waiting lists.

Finally, the committee welcomes the financial support that has been made to local authorities through the local government hardship fund, which supports initiatives including free school meals, self-isolation payments and an enhancement for social care workers' sick pay. The Minister will be committing an additional £26 million for social care through the hardship fund. We request an update on the monitoring and effectiveness of the fund and further detail on the additional £26 million.

I'm pleased to have been able to speak in today's debate, my first for me as the new Chair of the Finance Committee. I understand that the previous Finance Committees have had a constructive relationship with finance Ministers and I look forward to continuing this in my new role. Thank you very much.

I'm pleased to be part of this debate today and I thank you, Minister, for your opening statement. There is no doubt that the pandemic has pushed Wales to the cliff edge and it just shows how important it is that Wales remains an integral part of a strong United Kingdom. After all, the robust measures swiftly implemented by the UK Conservative Government to the tune of £8.6 billion in funding since the start of the pandemic protected hundreds of thousands of jobs, with livelihoods across the length and breadth of Wales being shielded from some of the most severe effects of the pandemic. This support is in addition, of course, to the UK-wide schemes such as the coronavirus job retention scheme and the self-employment income scheme.

But, Llywydd, on initial reading of the supplementary budget, I was shocked to note that there is still roughly £2 billion worth of unallocated money sitting in the Welsh Government's coffers; £1.2 billion fiscal and the balance made up in capital. This is a highly significant sum of money, which I'm sure all in this Chamber would agree. Time and time again, we've heard Welsh Government Ministers—and rightly so—calling for funding to deal with the pandemic. But to then not use all of it at a time of national emergency simply doesn't make sense. Llywydd, it's very much like being given money to hire a builder to prevent your damaged ceiling caving in, to then decide not to use all that money given to you, meaning the risk remains. The people of Wales need that investment now so that they can start to build back better. More so than ever before, we desperately need a sustainable long-term recovery plan for our NHS, our schools, businesses and vitally important local authorities. So, Minister, where is your plan to invest this unallocated £1.2 billion? When will services see the funding that they so desperately need?

Minister, as much as I welcome any credible move to kick start our economic recovery, I will still however point out areas of weakness. The reason for this isn't political, but it's what a reasonable opposition should do. That is why I'm somewhat dismayed that swathes of the supplementary budget will only touch the surface of what is actually required to help Wales bounce back from the pandemic. Take for instance the local government hardship fund, which finished in June, meaning councils are now facing a cliff edge financially. Or the extra cash announced for our cherished NHS being just a drop in the ocean, or the shocking fact that there appears to be no extra support for our rural communities, despite the crippling effect the pandemic has had on these rural areas. In other words, many of the measures outlined in the supplementary budget are either short-term funding or initiatives that have closed, but these initiatives are needed to provide long-term support.

Finally, Minister, I know that the pandemic has had a detrimental impact on the transport sector, and I recognise that the Government has provided additional support, such as the £16 million to Cardiff Airport and £70 million to Transport for Wales. However, it is worth noting that, as was mentioned in the Finance Committee Chair's report, this was on top of the Government writing off £40 million-worth of Cardiff Airport's debts and an additional £167 million given to Transport for Wales last year. Clearly, this isn't a sustainable way of running services. Can you tell me whether the Welsh Government is facing a future financial black hole because of this? What are your plans for putting these services back onto a sustainable financial future? Time is of the essence here. We need a bold, ambitious plan to ensure Wales bounces back post COVID. We all need now to act in Wales's national interest, which is why I sincerely hope, Minister, you will heed my calls today. Thank you, Llywydd.

Can I start by acknowledging the challenging circumstances faced by Government over the past few years, with the absence of comprehensive spending reviews and assurance in terms of the funding to be provided, and the ad hoc funding coming from Westminster? It's good to understand that we are hoping to move to a more stable cycle now, with two supplementary budgets rather than three, and so on. I'm sure people would welcome that. As a party, we are happy to be pragmatic and to recognise those difficult circumstances as long as the Government and Minister are open and transparent with us as we scrutinise those processes.

I would support the calls for better inter-governmental arrangements. I've been on the Finance Committee in the previous Senedd listening to the Secretary of State in one session saying that there are hundreds of millions of pounds of consequentials coming to Wales as a result of one announcement, but then two minutes later hearing a Welsh Minister say that it's tens of millions of pounds that would come down the pipeline, and that, in my view, doesn't reflect well on the situation that exists. Everyone's left scratching their heads as to where the truth lies, and I do think that both Governments need to rise above that in this ensuing period. It doesn't benefit anyone, and it certainly doesn't help in terms of scrutiny for us as Members, or in terms of ensuring that the additional funding, however much does actually arrive, works as hard as possible in terms of providing the services needed by people in Wales. But that's the end of the sermon there.

Of course, there are two elements to this supplementary budget, as the Minister explained—there's the technical element of restating the budget to reflect new portfolios and, as an opposition Member, I always want more information. It's always difficult to follow the money from one portfolio to another, and I would again echo a plea that's been made in the past, to provide greater detail to us when it comes to those figures.

The second thing—and it is a supplementary budget, but there is a very retrospective feel to this. These are all announcements that the Government is already committed to. We are confirming, to all intents and purposes, the commitments already made, where perhaps I would be eager for us to have more of an opportunity to discuss possible allocations looking forward, and moving forward with the budget within this year. The danger is that the second supplementary budget will also be retrospective in terms of the allocations that happen from here on in, which is a slight frustration, perhaps, from my perspective.

We've heard, of course, that there is £2 billion in reserve which is yet to be allocated, and one understands the risk of things such as a third wave, and the need to ensure that the Welsh Government can respond to that. But I think there is a risk that we are missing opportunities in this financial year. Plaid Cymru has been clear on the need to create more economic stimulus by investing in infrastructure to get the economy moving once again, and the climate change challenge provides a very broad canvas in terms of possible interventions in major infrastructure projects that I'm sure we would all agree need to be delivered. We've also been clear on the need for the Government to put its borrowing powers to work more effectively. The Minister in opening the debate said that she was eager to have more flexibility when it comes to borrowing powers—well, use the powers that you have in the first instance. If you don't believe that you need to use those powers now, as we try and build back better, fairer and greener, then when will that time come?

Now, in terms of some of the allocations—I am aware of time—but in terms of some of the specific allocations, in terms of health, we welcome and recognise the investment of £128 million in terms of recovery and reducing waiting lists, which are frighteningly high, as we would all agree. But we need to go beyond that too and put clear strategies in place with sufficient funding in place that not only restores services and deals with the backlog post COVID, but also allows the work of building a more robust and sustainable NHS for the future, which would allow us to redesign services for the longer term. Health boards have plans in place that need to be implemented and now is the time to create that new infrastructure that creates an NHS that is more resilient and more fit for the long-term future.

And, finally, the £206 million provided to local authorities through the local government hardship fund in the first six months of this financial year is something that local authorities have welcomed, but council leaders are telling me that they’re still unclear as to the intentions for the second half of this financial year. You have suggested that you are committed to continuing funding until the end of the financial year, but is that another £206 million? Is it another sum? Or is that £206 million to last until the end of the financial year? Council leaders tell me that they’re still not clear, and clarity on that would be welcomed, I think.

I very much welcome this first supplementary budget for 2021-22. It is an extraordinary time for this legislature and for the Welsh people never seen in peacetime. As we grapple with the climate change emergency and transformation, Wales continues to receive block funding 3 per cent below that of 2010 per population head. We face genuine insecurity over EU exit transition, financial ambiguity over lost UK transitional replacement funds, with former Objective 1 areas totally missed from UK levelling up funds, and what can be called at the very best a constitutional recalibration, contrary to devolution and our legislative mandate, and a real and chronic lack of fiscal flexibility and the missing comprehensive spending review. And throughout all of this, Llywydd, we fight the global pandemic itself, all it has meant for our people, our economy and our national resistance. 

I welcome being reappointed to the Welsh Finance Committee, and curtail my remarks to focus on recommendation 10 of the Finance Committee's scrutiny of the first supplementary budget. So, I have no hesitation in extolling the importance of local government in the delivery of vital services to people, often those most vulnerable in times of normality. The pandemic has demonstrated and evidenced how crucial local government has been in our recovery in pandemic logistics, in emergency co-ordination, administration and support. In short, local government has been essential to the Welsh fight against COVID-19.

Paragraphs 68 to 73 of the Finance Committee's report, pages 24 and 25, focus on local government in the first supplementary budget, and the final budget included £206.6 million to support local government for those first six months through the local government hardship fund. And that builds on over £660 million of additional allocation to local government in 2021. So, I was very heartened that the Minister confirmed that in addition to the funding for the local government hardship fund for the first six months announced at the final budget, the Minister has agreed an additional £76 million through the hardship fund particularly for social care pressures. 

The hardship fund has provided funding for free school meals, self-isolation payments and enhancements for social care workers' sick pay, and funded critical testing and visitor pods in our care homes, amongst many other interventions. And we know that this pandemic is not over, even though Wales has been kept safe by this Welsh Labour Government's cautious and epidemiologically-driven approach, and the immensely successful world-leading vaccination programme, ensuring that we are one of the most vaccinated nations on earth. And, as such, I very much welcome the Minister's comments to this place on 23 June that further funding could be allocated through the hardship fund, should it be needed, and it is indeed needed. The Welsh Government continues to keep Wales safe whilst ensuring that our Welsh finances, in the most trying of circumstances ever experienced by this legislature and our country, are in good order, and I support the approval of this first supplementary budget 2021-22. I urge all Members to do the same. Diolch. 

The Minister for finance to reply to the debate. Rebecca Evans. 

Diolch. I'd like to thank all Members today for their thoughtful contributions. This first supplementary budget is an important part of the budget process, allowing changes to be reported to and scrutinised by the Senedd, and I do welcome the constructive debate that we've had this afternoon. As I outlined in my opening remarks, although we've regularised a number of previously announced allocations from reserves to continue our response to the pandemic, this budget does return us to the more routine practice that we developed in terms of supplementary budgets that are more technical in nature. 

We've adopted a targeted and responsible approach that focuses on the immediate support needed in the context of a fast-moving pandemic, and have responded decisively to support the Welsh economy and ensure our public services were equipped to deal with unfolding circumstances. 

I think it's important to recognise that finance Ministers around the world have chosen to give themselves flexibility by maintaining an appropriate level of reserves, and, of course, that applies equally to the Chancellor who is holding significant reserves in order to continue to respond to the crisis. And in Wales, of course, we've been no different. We're holding COVID reserves to retain that flexibility to allow us to respond. 

As I have outlined to the Finance Committee though, we have agreed a further £26 million to extend the funding available within the local government hardship fund for social care, and, in addition, I've allocated an additional £10 million to the local authority hardship fund for the homelessness emergency response; an additional £4 million to help people self-isolate, extending that support until the end of March 2022; and £1.5 million to provide Wales and Africa COVID emergency grants. And I will be intending to make further announcements in the coming weeks. 

I also think it's important to recognise at this point that the nature of the COVID reserve is that it's non-recurrent, so we cannot rely on any of this funding being available next year, and that does provide us with some additional challenges in terms of the kind of interventions that we would wish to put in place. 

I did mention the local government hardship fund, and I do want to put on record the fact that I have given local authority leaders that confirmation that it is my intention to keep that fund in place throughout this financial year, and officials are currently working with officers in the Welsh Local Government Association, and in local authorities, to understand the need that is related to that particular fund for this year, because I do recognise, as others have, how critical it's been to supporting local government's response to the pandemic. 

I do welcome the Finance Committee's comments in relation to their interest in Welsh Government's relationships with the UK Government, and, of course, I am as keen as anyone that there should be strong engagement and co-operation between the UK Government and Welsh Government, particularly following the COVID recovery summit. But, now, we need to see that borne out in action and a real step change really in the way in which the UK Government interacts with the Welsh Government, and particularly so, I think, in terms of finance. 

The COVID guarantee that we had last year was a really helpful innovation, and that's something that I was involved in designing, to ensure that it met our needs here in Wales. But, this year, it's been much more difficult because the UK Government has made announcements since we've received our COVID funding earlier on this year which we simply don't know whether or not they're covered by that guarantee. They made large announcements of funding on education for example, and we don't know yet whether that is additional funding, if it's previously announced funding, or funding moved from elsewhere in UK Government's budget. So, this has been quite some time now since they've made that announcement, so it's really not acceptable for us not to be able to have that clarity that we need in terms of that funding. 

I also want to just briefly mention the additional funding for health. I'm working currently with the health Minister to determine what additional funding health might need on top of that £100 million in order to support it through the rest of this financial year, with that real focus on recovery. But the £100 million that's already been announced is very much there to help to start to address the backlog, and that funding was announced when we published the 'Health and Social Care in Wales—COVID-19: Looking forward' document, and it will be used across primary, secondary and community care, to reduce inequalities and improve the capacity for planned care. But, as I say, there will be further announcements made on that and a range of other matters later.

And just to address the issues raised about Cardiff Airport, that funding is very much there against a five-year plan for the rescue and restructure of the airport. And we've agreed that investment by way of a grant of up to £42.6 million over a five-year period, to enable the airport to restructure its operations and secure its long-term viability. And, again, I would say that this is not unusual—it's not unusual for Governments to be supporting airports in this particularly trying time for that sector.

So, I just start to conclude by noting the comments about the importance of transparency and the importance of scrutiny. And I give my commitment to this Senedd that I will continue to be as absolutely transparent as I'm able to be, and to welcome scrutiny, and welcome challenge, of course, at all times during the budget process. And just finally, this supplementary budget continues to fund the range of measures that we've put in place to respond to the pandemic. I've mentioned that there'll be further allocations, but those will be featured in the second supplementary budget, which I intend to bring in due course to the Senedd. I move the motion.

Thank you, Minister. The proposal therefore is to agree the motion. Does any Member object. [Objection.] I will defer voting under this item until voting time.

Voting deferred until voting time.