Last week, the Chancellor was keen to blame global events for the UK's dire financial outlook, including the pandemic and Putin's illegal invasion of Ukraine. While there is no denying that these have had a severe impact on our economy, the situation has been made worse by the ongoing mismanagement of the economy and public finances by the UK Government. The UK enters recession in a worse position than any of the G7 economies, and it's the only G7 country not to have regained pre-COVID levels of GDP and employment.

The UK Government has unleashed a series of economically damaging, self-inflicted shocks on our economy and country over the last 12 years, from austerity to Brexit, and the disastrous mini-budget, which created a huge hole in our public finances. The Chancellor has sought to plug that hole through a mixture of tax rises and punishing spending cuts. The vast majority of those spending cuts will come after 2024-25, delaying difficult financial decisions until after the next UK general election, and giving us pain today and pain tomorrow.

The first decade of austerity made the UK economy £100 billion smaller; widened the gap between rich and poor; made young people worse off than their parents were at their age; reduced home ownership; and created the current crisis in the private rented sector. And now, the UK Government is poised to repeat this flawed and failed experiment to fix the mistakes that it made. But we don't need austerity 2.0; what we need is investment in education and skills, business support and transport, to help boost economic growth and attract investment.

Before the autumn statement, we were facing the worst financial outlook since devolution. This remains the case. Our overall settlement over the three-year spending review period is still worth less in real terms than when it was announced last October. We will receive an extra £1.2 billion over the next two years as a result of spending decisions made in England, but our overall budget in 2024-25 will be no higher in real terms than in the current year. Our capital budget will be 8.1 per cent lower. Almost half of the increase in funding next year comes from non-domestic rates measures in England, not from extra spending on public services. The extra funding does not come close to what we need to meet the pressures across all areas of our budget, including protecting public services against the immense challenges caused by record inflation, pay pressures and energy costs. Our settlement could be up to £3 billion lower in real terms than expected, and up to £1 billion lower in 2023-24 alone.

In the face of these pressures, we must be realistic about what we can afford. We have multiple pressures and priorities that need to be accommodated or reprioritised. Funding received as a result of the autumn statement will only go so far in protecting delivery of the programme for government, mitigating the impact of the cost-of-living crisis, addressing public sector pay demands and continuing to support our humanitarian response to the situation in Ukraine. Challenging decisions and choices still need to be made, alongside ongoing consideration of the extent to which we are able to mitigate the loss of EU funding.

The capital outlook has deteriorated. While we will look to all of the levers at our disposal, we will have little choice but to scale back our capital plans and think more creatively about the funding of major capital priorities going forward. This will impact on our new Wales infrastructure investment strategy. As part of our ongoing budget preparations, we face incredibly difficult decisions. And while there are no easy choices, I remain committed to working with our partners to deliver the best possible outcomes within the funding that we have available. To be able to respond to the fiscal uncertainties, it's essential that we remain flexible and agile when making decisions regarding our future budgets. I remain committed to publishing our draft budget on 13 December.

The Chancellor did not allocate any additional funding in relation to the current financial year. Any changes to our settlement this financial year will be subject to the UK supplementary estimates process in the new year. The Chancellor has also stated there will be a spring budget, which could impact on plans for our final budget. So, despite this context, we do remain committed to continuing to work to prioritise our budgets, to shield the most vulnerable and to maintain our commitment to create a stronger, fairer and greener Wales as we prepare our draft budget for 2023-24.