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

Diolch, Llywydd. Minister, I'm sure all in this Chamber are relieved that negotiations with our teachers and our NHS unions over revised pay offers are looking promising and have averted further strikes by teachers and any NHS staff for the time being. Let's all hope that the offers will be accepted. But, for weeks, Minister, the Welsh Government had claimed that there's no money, meaning that any proposed pay rise would have been unachievable. So, given the u-turn that the Government has made, Minister, can you share the total amount that these increased pay offers will cost, and where this additional money is going to come from? And can you indicate which service areas will bear the costs and what things are likely to be put on hold as a result?

Well, I share your hope that the members of the unions will now accept the enhanced offer that has been made, which, just to be clear, is over and above the offer that was previously made when we accepted the recommendations of the independent pay review bodies. Our offer is, of course, an additional 3 per cent in this year and 1.5 per cent of that will be consolidated into next year. So, in terms of where we've been able to find the money, I refer colleagues to the second supplementary budget, which we published yesterday. And that sets out that we've allocated £130 million to the health main expenditure group and £35 million to the education MEG in order to cover that payment, should it be accepted within this financial year.

You'll also see from the supplementary budget that we've now drawn down everything that we can within this financial year from the Wales reserve, which is £125 million of revenue. That is not a comfortable position to be in at all—it's certainly not something that I'd intended to do at the start of the year. You'll remember that, when we set our budget for this financial year, it was less than £40 million that we intended to draw down and that was in recognition of the difficult two years that we face, which follow us in terms of the three-year spending review period. So, it's a very difficult situation, I think, now, budgetary wise, but absolutely, it was the right thing to do. So, just to assure you that, when colleagues vote on the supplementary budget, they'll be given cover then for the Welsh Government to spend the money that has been allocated. And also, there might be the underspends, which, obviously, we'll be driving now across different departments between now and the financial year so that we can make sure that we cover the whole of that award.

Thank you, Minister—thank you for that clarity. I think it's really important that the Senedd understands the detail. I know that it'll be in the supplementary budget and we look forward to discussing that earlier. There are always opportunity costs when things have to be adjusted like that. So, it's important that we do understand the implications of those decisions.

But, Minister, in a similar vein of understanding the implications of Welsh Government's decisions, you'll be aware that this year marks the entire decade since your Government unilaterally took control of Cardiff Airport. In that time, literally hundreds of millions of taxpayers' money has been poured into the site, and please correct me if I'm wrong, but I believe that it's well over £200 million that has been pumped into the airport, both in revenue and capital. This begs the question of what the wasted sums of money could have alternatively been used on over the years—the opportunity costs are colossal. Minister, do you regret the sums of money that your Government have poured into the airport over the last 10 years, and with hindsight, Minister, do you agree with me that it was a poor and costly decision?

Well, if my colleague, the economy Minister—sorry, the transport Minister—within whose portfolio this sits was answering the question, I'm sure he would refer you to the fact that the airport does have a particular plan to put itself on a sustainable footing for the future. I think it is important that the airport does have a sustainable plan in terms of becoming profitable, but I think it is important that we do have an airport here in Wales in order to service people who live in Wales. What we do have, I think, is a problematic situation where the UK Government seems very much interested, really, in supporting Bristol Airport at the expense of Cardiff Airport. We saw that in the debates that we had in terms of devolving air passenger duty in recent years as well. So, I think that that is of particular concern. But I think it is important that Wales has an airport; it's important that our airport becomes sustainable in the long term.

Well, thank you, again, Minister. I take it from that that you don't regret the investment over the 10 years, albeit that it's a huge amount of money, and I know that many Members in here would have liked to have seen that money spent in many other areas, such as health and education, and we might not have found ourselves in the poor situation we're currently in, but that's where we are. Unfortunately, Minister, examples of lost opportunities under the Government just keep coming up.

And now I turn my attention, finally, to Gilestone Farm, where Audit Wales have raised serious concerns over your Government's decision to spend £4.25 million of taxpayers' money on buying that farm. But only last week in this Chamber, Members of your own back benches openly raised serious concerns over the purchase. Do you agree with them that, in hindsight, once again, the decision to buy the farm was another example of your Government's poor judgment and a financial mistake?

Well, I think what's really clear from the auditor general’s report is that our acquisition of Gilestone Farm, to allow Green Man to develop its plans, was value for money, properly aligned to our economic ambitions, and followed the appropriate processes and approvals. And, to be clear, the report by Audit Wales underscores that the procedural integrity of the acquisition of the farm is not in doubt. The Welsh Government has the legal powers to acquire properties or assets like Gilestone Farm, and professional independent advice was sought as part of the purchase process. And also, the auditor general makes it clear that the advice to Ministers was set in the context of the Well-being of Future Generations (Wales) Act 2015 and our policies to support and further tourism and social and economic regeneration. I think the report also added that the advice sent to Ministers was well rounded, providing six options for Ministers to consider, including the option of not progressing with the policy proposal.

But, of course, no final decision on the future of Gilestone Farm will be made until there is an extensive due diligence process completed and, in the event that the detailed business plan does not meet our Welsh Government requirements or that Green Man does not enter into a prospective commercial lease, the Welsh Government will, of course, still have the farm asset and will be able to consider other options for it.

Plaid Cymru spokesperson, Llyr Gruffydd.

Diolch yn fawr iawn, Llywydd. Last week, Minister, you recall, I'm sure, Plaid Cymru making our case for the further devolution of tax powers, in that instance providing Wales with the ability to set our own income tax bands in line with powers already being exercised in Scotland, of course. Now, unfortunately, you and your colleagues voted down our motion, despite mounting evidence that the current income tax bands, which are, let's not forget, set by the UK Government for Wales, despite them being an exceedingly poor fit for the Welsh tax base. Now, a recent Institute of Welsh Affairs report stated that if you were designing an efficient system of income taxation for Wales, then the bands wouldn't look like they look now.

However, what's also apparent, of course, is that the Welsh Government's current agenda for the further devolution of tax powers, which includes an ambition to establish a vacant land tax is being undermined by a consistent lack of engagement and co-operation from the UK Government. You've described the agreed process for devolution of tax competence to Wales as 'not fit for purpose', so can you tell us, therefore, what recent discussions you've had with the UK Government regarding the review and reform of the process by which new tax powers are devolved? And what recommendations has the Welsh Government made to the UK Government in this regard?

So, I was surprised by the response of the leader of Plaid Cymru to my response to his debate last week, because I thought that I was very fair and measured in setting out that it is important for the Welsh Government to understand the proper implications of any particular policy before we hitch our horse to that particular cart. And I did say that the constitutional commission is going to be doing important work that looks at the future role that taxes might play in Wales. I also set out that there are some significant negative impacts that we potentially would have to consider as well. The situation in Scotland being that the tax system that they have and the choices that they've made mean that there will be a £100 million negative net impact on the Scottish budget, despite the fact that Scottish taxpayers are making £85 million greater tax effort. So, I think all of those things are important for us to consider.

But, in rejecting the proposals last week, I think what I was doing was setting out that we can't take a particular policy choice before we properly understand the implications. And, in response to one of the previous questions this afternoon, I said that we're working alongside HM Revenue & Customs to better understand that longitudinal data, which is coming forth now in respect of Scotland, to understand the behavioural impacts of different choices in respect of rates of income tax. What I was trying to set out last week was that we want to take a considered, evidence-based approach, which I think is the right thing to do.

In terms of the devolution of further tax powers, I agree with what I said previously and with what you've quoted today, which is that the system that we have isn't fit for purpose. But, I am seeking a meeting with the new Financial Secretary to the Treasury to discuss the issue further, and I hope to have that meeting shortly, and I'm more than happy to update colleagues following that meeting.

It would be really good to have that update, as an when it's available, although your answer feels a little bit like a previous answer you gave me a while ago.

The first part of your response takes me on to my next question, really, because I was going to refer to the fact that you, in your response to our debate last week, said you needed a better understanding of the behavioural changes and that that would be key to developing and maturing the Welsh tax policy agenda, and I clearly agree with that; it's an important factor. But it's also true that the evidence base isn't there—it's lacking. Indeed, last week's report from the Finance Committee on the draft budget expressed disappointment that the Welsh Government hasn't undertaken a comprehensive analysis of what behavioural impact the raising, or indeed the lowering, of the Welsh rates of income tax would have, and I would certainly echo the committee's view. Because if you suggest that you can't vary Welsh rates of income tax without understanding any subsequent behavioural changes, then without getting that work done, your hands will forever be tied. So, I presume that you do acknowledge, first of all, that there is a glaring need, as the Finance Committee report emphasised and as you suggested in your previous answer, for that work to be done. You mentioned the work by the HMRC, maybe you could just explain whether that is in a specific Welsh context, because there are other pieces of work out there that relate to other jurisdictions but may not, obviously, transfer directly over to our experience here in Wales. It really is important that we address that evidence gap, because otherwise the risk is that I'll be coming back here next year and the year after, listening to you giving me the same answers over and over again.

So, in respect of the evidence base that we currently use, we already take into account behavioural impacts in our Welsh rates of income tax ready reckoner, which you'll find on the Welsh Government's website. That shows that, for example, were we to raise the additional rate of Welsh rates of income tax, we would probably bring in around £7 million, but actually, the net impact would only be around £3 million, as a result of behavioural changes. We understand that from the basis of a Swiss study—officials advised that that's the closest proxy that we can use in the current circumstances in the absence of any more detailed information that we have. But again, this is an important piece of work for the constitutional commission. 

But then, I'd also point colleagues to the independent body that advises the Scottish Government on its budget and its tax choices—so, their version, if you like, of the Office for Budget Responsibility, in terms of presenting detailed information. I think that if you look at that latest report, you'll see that if the Scottish Government were to raise the very highest rate by 1p it would bring in £30 million, but the net impact would only be around £3 million as a result of behavioural changes and out-migration and so on. All of that information is there. We're considering it all the time. But we do need to build up a proper evidence base so that we can take well-informed decisions.