Questions not from the party spokespeople. The Conservative spokesperson, Peter Fox. 

Thank you, Presiding Officer, and good afternoon, Minister. I've got a feeling I know what the answer to my first question will be. Over the last few weeks, Minister, we've spoken a lot about the challenging fiscal environment, as well as the UK Government's response to this in its autumn statement, which, of course, provided a welcome injection of additional funding to the Welsh Government, as well as protecting the most vulnerable in society. In the local government family, however, there is worrying uncertainty and concern about future funding commitments to local authorities. Councils are calling for their share of additional moneys to help meet future budget shortfalls, much like your political colleagues in Torfaen cabinet, who last week said that they will be, quote, 'lobbying really hard' for the additional monies from UK Government to be passported to local authorities. Minister, I'm sure, within the finance forum, council leaders have shared their concerns robustly. Can I ask, then, whether they can expect additional support, moving forward, and can you provide assurances that any new Government policies or burdens levelled on councils will be fully funded?

I'd just refer to my previous answer to the Member's colleague, but I will say that I do meet very regularly with local government leaders. My officials meet very regularly with officers, including treasurers across local government, to discuss the particular pressures that they are facing. I've got to say that the work that the Welsh Local Government Association presents us with is always very useful in terms of understanding those particular pressures, and understanding the quantum of funding that local government tells us that it would need to continue running the services and to continue delivering for people in their communities. And then, of course, my officials will test those figures with local government to come to a better understanding of them.So, just to reassure, that level of engagement is going on. We are listening very carefully to what local government is telling us that it needs, and also very carefully to what other public services are telling us they need, and, obviously, other parts of Welsh life as well that have an interest. 

But, just to say, really, this budget is probably the hardest one that we've faced, probably since devolution, I think, and there are going to be really difficult decisions made. So, it's not a budget where we're looking to do lots of new things; it's a budget where we're focusing very much in a laser-like fashion on the things that really, really matter and that we need to protect. 

Thank you for that, Minister, and I concur with Huw Irranca-Davies. I chaired, or hosted a meeting for Members to join local authority leaders, and, sadly, I was the only one who turned up, even though we had 10 south-east Wales leaders on the call sharing the scale of their issues. And the scale of the challenge is huge, and the financial outlook is challenging. But some councils are far better equipped to face this than others. Minister, as I've said on a number of occasions, the formula for funding councils is out of date and is unfair. It sees some councils able to stack up colossal useable reserves while others struggle to meet their needs. I understand reserves, I can absorb the stock answers, but I understand the situation, as most local government members here will.

As Altaf Hussain mentioned in his previous question, we saw an increase of over 35 per cent in useable reserves held at March 2021 to £2.1 billion. Now, sad as I am in taking some time to trawl through the draft statement of accounts for March 2022 over the weekend, I've noticed an increase of well over 30 per cent again, some almost 50 per cent, with a circa increase of probably £600 million at March 2022, leaving a collective useable reserve pot of £2.75 billion. However, it's not a fair distribution. Some, at March of this year, held well over £200 million whilst others hold minimal useable reserves.

Minister, do you think that, at a time of such financial pressure for our country, it's right for some councils to hold so much in reserves? I know that a portion will be school balances and some will be capital, but some councils hold significant amounts of useable reserves in dormant, unused, earmarked accounts. So, shouldn't the Government find better and fairer ways to distribute finance? Especially at the moment, so that councils don't have to rely so much on hard-pressed council tax payers who can ill afford—

Don't go over the page, because you're already on 2 minutes 20 seconds. So, if you can ask the questions.

I think I'm fine.

Yes, I think you asked a few questions.

I understand the question, and to be fair to the Member it is a question that he does raise regularly. I don't share that level of concern at the level of reserves that local authorities have, because I think that, when we're going into what will be the most difficult couple of years for local authorities, for them to be in a better financial position than they would otherwise have been, I think, is a good thing. Part of that is the additional funding that we've provided through the crisis of the pandemic, of course. Also, there will be different things affecting local authorities. The Member will know that there was lots of activity that didn't take place, which had been planned during the pandemic, and that has again led to the rising of some reserves in some authorities. But, he's absolutely correct that levels of reserves are different across different authorities. I don't think that that's a factor of the local government settlement and the formula, however, because the formula looks at a whole range of measures, many of them are related to the nature and the context of the population that is being served and the nature of the geography of the area that is being served, and neither of those things relates to reserves in particular. If local authorities wanted to look at the settlement through the lens of reserves, then, we could ask the distribution sub-group to do some work on that, but it's not something that any authority leader has raised with me at this point.

Thank you, Minister, but the system isn't working, because it's allowing councils to continue to rise council tax whilst at the same time growing reserves in some cases. Your predecessor Leighton Andrews saw this and produced a guide for councils in 2016 to help them understand and better scrutinise reserves and how they may be used. Minister, will you consider reviewing earmarked reserves held by some councils in the same way that councils do with their schools, to understand if earmarked reserves are genuinely being used for their intended purposes, perhaps assessing if they have been drawn down in the past five years or longer and, if not, question why? Some will have held core reserves for many, many years. Earmarked revenue reserves are the same as general reserves, they're just stored in a different place and they are available to be used in any way. So, some may say that they are for a rainy day. Well, Minister, it's pouring down, but some councils have huge umbrellas, others have tiny parasols. So, do you agree that such an analysis of held earmarked reserves should take place as soon as possible to enable you to consider a more sustainable approach to funding valuable public services across the country?

I would say that local authorities are telling us that they are seeing massive pressures and gaps in their budget, both in this financial year and next financial year, and that they are looking to reserves to, in part, meet that challenge. I'm more than happy to ask my officials to have some further discussions with the Treasury on the specific point in terms of understanding reserves and the use of them. I don't think that local authorities have been anything other than straight with us when they tell us about the pressures that they are facing at the moment, and we do enter into lengthy discussions with them about the pressures ahead. But reserves can only be used once. Lots of the pressures that local authorities are facing relate to pay in particular, and, obviously, using reserves to meet pay pressures isn't a sustainable solution to that particular problem. I'm very happy to have further open discussions with local government on this issue.

Plaid Cymru spokesperson, Llyr Gruffydd. 

Diolch, Llywydd. Good afternoon, Minister. There was reference in this Chamber last week to work by the Public Accounts and Public Administration Committee, scrutinising the Welsh Government's accounts for 2020-21, which found that there'd been an underspend of £526 million and, as a result, £155 million of funding allocated to Wales had been returned to the Treasury. I'm sure you'd wish to say something about that. But more recently, my understanding is that, in the last few weeks, the Welsh Treasury estimated that there's about £80 million of unallocated funding in the Welsh budget at the moment. Now, the health Minister, of course, directly contradicted that in her contribution here last week, when she said that there's currently no unallocated spending and no underspend when she was asked about the Welsh Government's budget and the current figure for the Welsh reserve. So, can you set the record straight this afternoon and give us clarity regarding the current estimate of unallocated funding and underspend in the Welsh Government budget, as it stands at the moment?

I'm very happy to set the record straight on both of those issues, and I'm grateful, particularly in relation to the first question, to have the opportunity to do so. On 5 August, I did write to the Finance Committee, and the letter has since been also shared with PAPAC, demonstrating that in the 2020-21 financial year, which was, of course, the extraordinary COVID year, the Welsh Government did operate within the overall departmental expenditure limit budgetary control set by Treasury, but, unfortunately, we weren't offered a level of flexibility to move money from revenue into capital to help us manage that particular issue. And, as a result of that inflexibility, there was funding returned to the UK Government.

But I think the most important point here to note is that the total underspend in 2020-21 by all UK Government departments was £25 billion, and that represents almost 6 per cent of the total provision made available to those departments in that year. All underspends by UK departments were returned to HM Treasury and, actually, the Department of Health and Social Care alone underspent by over 9 per cent, and that department alone returned £18.6 billion to Treasury. A Barnett share of that would have amounted to around £1 billion for Wales, and I think that that partly is behind the reason that the Chief Secretary to the Treasury has been so unwilling to offer us a level of flexibility. That's one of the issues that we have, of course: we need a much more settled way of dealing with these year-end issues, because relying on the flexibility, or otherwise, of whoever happens to be the CST at that point isn't an appropriate way to go forward.

So, just to finish this particular point, the overall underspend for Wales in that extraordinary year was only 1 per cent of the available resources, and I think that demonstrates the effectiveness with which our resources were managed during the extremely challenging circumstances. And it does continue the Welsh Government's record of being amongst the best UK Government departments, as they would see us, in Treasury terms, and devolved Governments in terms of utilising our budgets. So, I'm grateful to have the opportunity to put that on record. I'm happy to share that letter that I sent to the Finance Committee with all colleagues, perhaps, by putting it in the Library, Llywydd. 

On the point of reserves, at the final budget agreed in March 2022, the unallocated DEL stood at £100 million revenue and an overprogrammed capital budget of £76 million. In the first supplementary budget, then, which was quoted in the exchange with the health Minister, the unallocated DEL was £152 million, and that was largely as a result of consequentials from the UK Government's spring statement and main estimates, and the overprogrammed capital position reduced to £68 million following a reduction in spending forecasts, but then that was offset again by the £30 million contribution in relation to Ukraine.

Since then, of course, we've seen the cost-of-living crisis very much take hold, so I don't think it's appropriate to give a running total of where we are in terms of pressures across Government and where we have the ability to respond to that within the reserve, just because that situation literally changes on a day-to-day basis. So, I have monthly monitoring reports from every colleague across Government, setting out where they are overspending and underspending against various items; I then discuss those with officials and we consider what appropriate mechanisms we have to respond to that to mean that we can bring the budget in where it needs to be at the end of the year. That situation does change all of the time, but what I will say is that the funding that we have available at the moment in reserves does not, by any stretch of the imagination, meet the pressures that we see across Government, which I think was what the health Minister was trying to convey in that exchange.

Okay, thank you for that, but I think we can surmise, therefore, that it isn't true to say that there isn't any at the moment. I respect your wish not to offer a running commentary, but when we have different messages coming from different people, I think we need a degree of transparency around that. I fully concur with the point you made about end-of-year flexibilities, and this, again, reflects on the current settlement and arrangements around funding, which, obviously, are ones that we've highlighted and come at from a very similar standpoint, I'd imagine.

Now, it just underlines, of course, the need to make sure that every pound works as hard as possible, particularly in the current financial climate. I noticed in the Welsh Government's response to the Finance Committee's report on post-EU funding, which I know is the subject of a debate later on this afternoon, but there's one particular point in that response that I just wanted to highlight to you, the Government says in its response that,

'The remaining ERDF and ESF programme spend in Wales is £619 million,' as of the end of October just gone. Now, the projected spend from that by the end of January is £170 million. So, that leaves £450 million to be spent on activity to be delivered up to the summer and, obviously, claimed for by December next year. Are you confident that that money will be fully utilised? Can you assure us that there won't be any underspend in that respect and that no funds will actually be sent back or lost to Wales? Do you acknowledge that if that does happen, then it will represent a huge failure at a time when, as I say, Wales needs to utilise every single penny that we can?

We absolutely aim to use all of the European funding that has come to Wales, and that is, actually, one of the tools that we have to be able to manage our budget within the financial year—to take decisions as to when, exactly, we draw down that European funding, and help us manage the overall budget position. So, it is a tool that we're able to use and that we consider actively throughout the year. But, absolutely, it's our intention to use all of the funding, of course, that has come to Wales.