Part of the debate – in the Senedd at 6:02 pm on 13 July 2021.
Diolch, Llywydd. Continuing the tradition of the previous administration, I am pleased to outline the preparations for the Welsh Government's budget for 2022-23. This annual debate has become an important fixture in the Senedd calendar, providing an early opportunity to look ahead to next year's spending priorities, and, importantly, to give Members the opportunity to shape those preparations. As a Welsh Government, we have been given a clear mandate by the people of Wales following the election, a mandate to deliver on the commitments outlined in our ambitious programme for government. But we have equally been clear that we have no monopoly on good ideas. As the First Minister has already said, we will look to new ideas and new proposals from wherever they come in this Chamber, wherever they benefit Wales and our communities. And it's in that spirit that I open today's debate.
Prior to outlining our approach, it is important that we recognise the wider context within which we are undertaking these preparations. What previously we would have considered extraordinary has, sadly, become ordinary. The challenges we face are significant. They include the ongoing impacts of the UK leaving the European Union, the urgent need to respond to the climate and nature emergencies, as well as the devastating impacts of the pandemic itself.
The impacts of those challenges will be profound. Over the course of the pandemic, at least two years of gross domestic product growth will be lost, much of which may never be recovered. The Office for Budget Responsibility believes the pandemic will permanently reduce GDP by 3 per cent. Welsh businesses are now beginning to encounter many of the real costs of the UK leaving the EU. The loss of the £375 million of EU funding a year to the Welsh Government will have serious implications for Welsh businesses, individuals and our core public services. We know the pandemic's impact has fallen disproportionately on the most vulnerable, and we know that the Climate Change Committee has estimated that the additional investment required in Wales as a whole could rise to over £2 billion by 2030 to address our decarbonisation needs, not including adaptation costs or the threat to biodiversity.
It is clear the fiscal context of the pandemic has weakened public finances. The Resolution Foundation estimates non-protected departmental resource spending per person will be 24 per cent lower in real terms in 2024-25 than in 2009-10. Beyond the next spending review, OBR analysis highlights severe long-term pressures, driven by demographic change and increasing costs of healthcare. Left unaddressed, these pressures would unsustainably push UK Government debt to more than 400 per cent of GDP 50 years from now.
We also face ongoing uncertainty over the timing of the UK Government spending review and whether the Chancellor will indeed keep to his promise of providing a multi-year settlement. Until this concludes in the autumn, we are having to undertake our preparations without certain knowledge of our settlement. In that context, we will continue to press the UK Government to urgently confirm its intentions as soon as possible.
I am grateful for the Finance Committee's recognition of this challenging context. I intend to follow recent practice and publish a combined outline and departmental draft budget on 20 December and the final budget on 1 March. I fully recognise the impact this timetable will have, particularly on local authorities and the third sector, as well as the impact that this will have for Senedd scrutiny of our plans. In setting out this plan, I want to strike a careful balance of ensuring that we can effectively undertake our preparations whilst providing as much certainty as we can to partners and ensure the maximum time available for scrutiny in the Senedd.
In preparing for the challenges to come, we must continue to maximise the impact of our available funding to prioritise the delivery of our ambitious programme for government, and in that spirit, I want to recognise the tireless work of our partners through the pandemic. In recognition of that work, I want today to confirm that funding for health, social care and local government will remain a core priority of our budget preparations.
We have previously stated our ambition to provide multi-year settlements if we're in a position to do so by the UK Government. On the basis that the UK Government keeps to its promise, we are undertaking our own preparations to enable us to respond. In the context of a UK efficiency review resulting in a less favourable outcome, we cannot ignore the incredibly challenging context we face and the difficult choices that flow from it. But we will not let these challenges daunt our ambition. Difficult times require difficult choices and that is why we will use the development of the new 10-year Wales infrastructure investment strategy, which I intend to publish alongside our 2022-23 draft budget, to shape the important work that we need to do in the coming years to strengthen the link between infrastructure and the need to tackle the climate and biodiversity crisis. We will look to all levers at our disposal, but we also remain committed to the promises of our manifesto. I am committed to respect the manifesto pledge we made not to raise Welsh rates of income tax whilst the economic impact of the pandemic is still being felt.
I know there is a great deal of interest in this budget. As in previous years, I intend to engage with groups from across public life in Wales. I hope Members will take the opportunity to speak to their own networks to consider and to bring forward innovative and novel ideas to meet the challenges that we have to face. The Welsh Government has been elected with a clear and bold mandate: to build a fairer, greener and more prosperous Wales. Our budget next year will support us along that path to deliver on our programme for government, and, in that work, I want to listen to and work with colleagues from across this Chamber, and I look forward to the debate today. Diolch.