Questions now from the party spokespeople. The Conservative spokesperson, Peter Fox.

Thank you, Presiding Officer. Minister, I know things got a little passionate in the Chamber yesterday, so I do just want to bring the focus back onto how we can help the Welsh economy and Welsh businesses to move forward. In your statement yesterday, you suggested that you didn't support the idea of investment zones, although I appreciate that you'll be having more conversations with UK Government counterparts about these. I believe that these zones have the potential to drive forward business growth and high-skilled jobs in the areas that need them most. Rather than displacing economic activity, if designed in the right way, they could be an opportunity for us to spread investment and aspiration across the country. They also have the potential of complementing some of the other growth deals, city deals, potential free ports as well. Now, I know that our experience with enterprise zones has been mixed across Wales, but there is therefore scope for more ambitious plans to kick start developing. As Ben Francis, the policy chair of the Federation of Small Businesses Cymru, said,

'Wales cannot afford to be left behind in the mission of boosting regional competitiveness.'

Will you give assurances, Minister, that you do intend on taking an open-minded approach to the potential for investment zones to be established in Wales, and, if you are against investment zones, then what is the Welsh strategy? How do Ministers intend to use their levers to deliver the levels of economic growth that are needed to overcome the present challenges and to deliver a brighter future for our communities?

Well, we are very sceptical about the benefits that investment zones could bring, precisely because we disagree with your analysis in the sense that we believe that investment zones do have the propensity to draw investment away from some areas, and so displacing economic activity from the areas that it's most needed in. And that was one of our concerns over the free ports as well.

We are open, of course, to having discussions with the UK Government to hear them out on this issue to see exactly what their proposal is. I do think it's a shame that they didn't have discussions with us ahead of the announcement, bearing in mind that if they want to deliver this policy in Wales, they're going to need Welsh Government to work with them in the sense that non-domestic rates are devolved to Wales, land transaction tax is devolved to Wales, planning is devolved to Wales. So, they will need all of those tools to deliver those investment zones. Of course we'll have the conversations, but I think our starting point is that we're sceptical about the benefits that they can bring. 

Thank you for that, Minister. I think what the UK Government has proven, through its discussions and movement on free ports with Welsh Government, is that they are happy to talk and work with you. So, I'm sure that can happen with the other zones as well. 

Presiding Officer, we've heard a lot about the energy crisis over recent months, and I very much welcome the UK Government's energy bill relief scheme. This is something that obviously offers certainty to businesses and provides valuable support at a difficult time. But an issue that hasn't been spoken about much is the cost-of-doing-business crisis, that business overheads have increased, squeezing margins and placing more pressure on businesses. Such issues are being felt right across the economy, with the latest business barometer from Lloyds Bank showing that Welsh firms reported lower confidence in their own business prospects month on month, down 37 points at 4 per cent. Businesses then have suggested that they will require additional financial support in addition to support for energy costs to help them through this period.

Minister, what discussions have you held with businesses and business bodies about the help that they need, and how will this feed into your budget this autumn? For example, what consideration have you given to introducing a discretionary scheme in partnership with councils, similar to what was put in place during the pandemic? And finally, what conversations have you had with your UK counterparts about ways in which self-employed people can be given tailored support, recognising the particular concerns they currently have?

Well, just to, I suppose, finish the picture on the last question, because you did mention free ports, I should have added as well that any discussions and any agreement that we might come to, of course, would be in the same vein as our approach to free ports, where we were not willing to accept any dilution in our environmental standards or our approach to fair work. So, those things will be absolutely fundamental in any discussions that take place following the announcement by the UK Government.

But I share your concerns about the impact of the energy crisis, and the wider, now, economic turmoil, on businesses across Wales. The UK Government's announcement will go some way to supporting businesses, but I just think that giving a guarantee for six months just doesn't go, by any means, far enough, and there's a lot of uncertainty in terms of what comes after that six-month period. 

Ahead of the Chancellor's mini statement, I did write to him asking for some urgent action to address the significant gaps in support for businesses, amongst other sectors, and obviously there was really nothing forthcoming for business, beyond that announcement on the energy cap from the UK Government. I think they reannounced something on the freezing of the multiplier, which was already built into their plans and our plans, so that was obviously disappointing.

Of course, we'll continue to have discussions. The representative from the CBI was at a social partners meeting on the cost-of-living crisis just this morning, with myself, the First Minister, Minister for Social Justice and others, and that was a really, really important and useful meeting. I know that my colleague Vaughan Gething meets very frequently with representatives of business as well. And of course, support for business will be right at the front of our discussions again when we meet as a group of Ministers in our next inter-ministerial group.

Thank you for that, Minister. I'm still slightly concerned because there does not seem to be a clear strategy from Wales's Government of how they are going to specifically support businesses moving forward at a very difficult time. I know you're already reviewing the future of non-domestic rates in Wales, and I look forward to seeing your suggestions in due course, but we also know that, currently, rates here in Wales are higher than in other parts of the UK, whilst the Welsh multiplier is already at a record high. But add in the concerns about the impact that the current high level of inflation will have on business rates on top of the existing concerns and it's clear to see why the sector is calling for urgent help to ease the pressure on them. In fairness, I do want to welcome the business rate relief scheme that the Welsh Government has previously announced, particularly during COVID, but clearly we need a new approach to business taxation that incentivises rather than disincentivises growth and job creation. 

In the short term, Minister, do you agree with calls made by the Welsh Retail Consortium for you to use your upcoming budget to, at the very least, freeze business rates in order to support retailers during these difficult times? And in the longer term, would you consider looking at more innovative ways to encourage business growth, such as a tapered approach to business rates for start-ups and relief schemes for those businesses looking to expand to additional premises and take on new employees and apprentices? Thank you.

So, on the issue of non-domestic rates, I'm pleased that the consultation that we recently published has been warmly welcomed, and I'm looking forward to reading the responses to that consultation. In regard to what we might be planning now for our budget, which we will be publishing in the middle of December, of course you'll have heard the statement from the Chancellor on Monday that there's no intention now to bring forward a budget until the spring. So, we are working on the basis that our budget will be fixed, basically, from that which we agreed in our three-year spending plans last year. So, we're not looking to situations where we will have additional funding to allocate, and it's on that basis that I do ask colleagues, and others from outside the Senedd, that, when they are asking for additional funding for areas, particularly those that would cost hundreds of millions of pounds, such as that that you've just described, we do need to identify where in our existing plans we would move that money from. Because I just want to be really clear that our plans at the moment are based on our budget being fixed and there not being additional funding forthcoming for announcement in our draft budget. So, I think that is an important context for all of us. The only main move that we see at the moment would be repayment of the national insurance contributions funding, which, obviously, employers now will not be needing to pay, so that was included in the spending review, and that will need, I think, to go back to Westminster.

Plaid Cymru spokesperson, Llyr Gruffydd.

Thank you very much, Llywydd. I raised with you yesterday, Minister, the need for the Government to now use the powers that you have to protect the basic rate of income tax in Wales, in order to protect the key services that many vulnerable people will be reliant on during the difficult period ahead of us. You didn't answer my question then, but you did say, and you have consistently said, that the Conservatives' plans in Westminster are regressive and unfair. 'It embeds unfairness' were the words of the First Minister, and he is quite right, of course. But that is just as true of the cut in the basic rate too, isn't it? Because millionaires will benefit from this, and anyone who earns more than £50,000 will get at least five times more benefit from a penny off the basic rate as compared to someone who's, say, on £20,000 per annum. And most of our pensioners, and anyone who doesn't earn enough to pay income tax, the poorest in society, won't see any direct benefit from this. But, of course, they will be the first to feel the impacts of the loss of services that will come as a result of it. So, if you're not willing to commit to retaining the basic rate at 20p in Wales, will you at least confirm that you agree that using a cut in the basic rate of income tax isn't sufficiently targeted to help the most vulnerable in our society?

Llyr Gruffydd is right that I didn't answer his question yesterday, and I realised it immediately after I finished speaking. But I was pleased to be able to answer the same question, which was raised by his colleague the Chair of the Finance Committee during the same session. And I can only repeat what I said yesterday, in the sense that Welsh Government has an established process for dealing with setting Welsh rates of income tax. We announce our plans, we bring them to the Senedd, we debate them and we vote on them here, and that's normally done alongside our final budget. So, I'm not in a position to say anything more today. Obviously, there will be discussions and considerations to be had in advance of that, but, certainly, this will be something that we come to as a Senedd to debate and vote on in due course. But I don't think that the announcement by the UK Government on Friday necessitates an early decision on the part of the Welsh Government, although I do appreciate the points that have been made.

Well, surely you will have considered this issue. The cut in the basic rate was going to happen from 2024 under Rishi Sunak's proposals, of course. So, hadn't you already started to consider or assess whether the time had come to use your powers in terms of Welsh income tax rates? Has there been any modelling done or is modelling happening to inform that debate? Because, on the one hand, you're constantly complaining of the shortage of funding to maintain services—and you've done that again earlier this afternoon—but, on the other hand, you appear reticent not to increase the tax in this context but to keep it at its current level, something that would produce some £200 million to help safeguard health, care and education services in Wales from the cuts that you're complaining about. Isn't there a major contradiction that you're reticent on the one hand to look in earnest at the tax levels in Wales within the powers that you hold, whilst you're also complaining that there isn't enough money in the coffers? 

Well, we consider all of our tax levers at all points across the rates and bands that we're able to set in Welsh rates of income tax, land transaction tax and landfill disposals tax, whilst also looking at the local taxes that we have here in Wales as well. So, all of these things are constantly under review. Of course we do the modelling to understand what the impact would be of different choices. There was a really important piece of work undertaken by the Finance Committee previously that looked at the implications of raising what was at the time the additional rate, and that, I think, was quite helpful in terms of getting to grips with what is a very new thing for us, of course. We've only had Welsh rates of income tax here in Wales since 2019, and we're starting to understand what the options might be for the future. Of course, we consider all of these things at all times, but what I'm not going to do is make any announcements outside of our normal budget process.