So, item 9 is next, and it's the debate on the second supplementary budget for 2022-23. I call on the Minister for Finance and Local Government to move the motion. Rebecca Evans.

Motion NDM8206 Lesley Griffiths

To propose that the Senedd, in accordance with Standing Order 20.30, approves the Second Supplementary Budget for the financial year 2022-23 laid in the Table Office on Tuesday, 14 February 2023.

Motion moved.

Diolch. This supplementary budget presents the Welsh Government's final spending plans for the current financial year. It increases the overall Welsh fiscal revenue and capital resources by £163 million, a 0.7 per cent increase on the position set out in the first supplementary budget, published in June 2022. 

In the main, this small increase is driven by transfers from other Government departments for specific purposes, which includes the tariffs agreed to support those fleeing the conflict in Ukraine. We have also drawn down the maximum possible from the Wales reserve. By utilising all our unallocated reserves in this budget, our fiscal spending plans for revenue and capital have increased by a total of £412 million—a 2 per cent increase.

We have had to make hard choices given our competing priorities. In this budget, we have made allocations to the health and social services MEG and the education and Welsh language MEG of £120 million and £32 million respectively, to support pay settlements for NHS Wales staff and teachers.

Our NHS faces record demands and increased costs whilst still recovering from the pandemic. In recognition of this, we are allocating a package of £170 million; £21 million is being repurposed from other portfolios in order to support key front-line services and to protect the most vulnerable.

To support our ongoing humanitarian response to the war in Ukraine, we have allocated £92 million in addition to the £20 million provided in the first supplementary budget. Seventy-four million pounds of this has been received from the UK Government to support these costs. 

I thank the committee for its consideration of this budget and the publication of its report, and I will provide a detailed response to its recommendations in due course. I ask Members to support the motion.

I call on the Chair of the Finance Committee, Peredur Owen Griffiths. 

Thank you very much, Dirprwy Lywydd. I'm very pleased to speak in this debate today on behalf of the Finance Committee.

The committee scrutinised the second supplementary budget on 1 March, and I thank the Minister for her attendance at that meeting. The committee's report was laid before the Senedd yesterday, and the report makes seven recommendations and comes to three conclusions. On the whole, the committee welcomes the areas prioritised by the Welsh Government in this supplementary budget, and the approach taken by the Minister in managing the resources available as we near the end of the financial year. However, we have identified certain areas where improvements can be made, and I turn to these now.

I'd like to begin by recognising the budgetary uncertainties caused by the ongoing disputes relating to public sector pay. We all hope for a swift resolution to those discussions and, above all else, regret the impact it's having on the staff themselves. However, this situation is placing significant pressure on delivery partners across public services. Worryingly, it has the potential to place unnecessary burdens on those sectors, as they seek to understand their financial position from one year to the next. We therefore call on the Minister to put controls in place so that delivery partners have as much clarity as possible about their financial position at the end of the financial year, given the impact from key pay awards remaining unknown. Because of this situation, the committee fully recognises that last-minute changes to budget allocations may be required this year. Although these may be unavoidable, we believe the Minister should be upfront about how such costs are covered within existing budgets. As a result, we have recommended that the Minister provides additional details of any significant last-minute allocations made between now and the end of the financial year.

Supporting the NHS, then. Turning to the impact of inflation on our key public services, while we welcome the steps taken through the supplementary budget to address pressures in the NHS, we are concerned with the deficit forecast for all but one of the local health boards. Although the committee is assured that the Welsh Government will not need to bail out health boards that go beyond their allocated budgets this year, we believe further steps can be taken to ensure that overspends do not arise in the first place. We therefore recommend that the Minister continues to monitor this situation closely and take measures to ensure that each health board does not exceed its funding over the rolling three-year periods, as required by the National Health Service Finance (Wales) Act 2014. Furthermore, where health boards are overspending in a single year, these should be funded from within the existing health and social services departmental budget.

Dirprwy Lywydd, we are all aware of the humanitarian impact the war in Ukraine is having, and we are thankful to our local authorities for providing crucial support and much-needed sanctuary for those who need it. However, it is unclear whether local services are sufficiently resilient to deal with the pressures placed upon them. As a result, we recommend that the Welsh Government provides local authorities with appropriate levels of support, and that support is provided consistently across Wales. We are also mindful that the resources to support Ukrainian refugees is highly dependent on funding provided centrally by the Treasury. We are therefore fully supportive of the Minister's efforts to ensure the continuation of existing funding levels from the UK Government.

The committee also welcomes the information provided in the Welsh Government's outturn report for 2021-22 on the balance of the Wales reserve. We have long called for these figures to be provided and are pleased to see it's available publicly. However, we believe the Minister can go further by regularly providing the Wales reserve balance, so that it would be included in future budget documentation. This would go some way to aid transparency in the area of the budget that is often opaque and difficult to monitor.

Finally, the committee was pleased to hear about the positive meetings held between the Minister and the latest UK Chief Secretary to the Treasury. Fiscal devolution works most effectively when harmonious inter-governmental relations exist, and we hope that the nature and spirit of these initial meetings will continue. As Members will know, this committee has time and again supported the Minister in her efforts with the Treasury to increase the size of the Wales reserve and borrowing limits, so that they are at least in line with inflation. We strongly agree with the Minister that the current rules are inherently unfair. It seems to us that local authorities have more discretion than the Welsh Government to carry over funding from one year to the next, and this is surely not right. The committee therefore reiterates its calls for the UK Government to increase the Welsh Government's overall and annual limits for borrowing and reserves, and for these limits to be reviewed regularly. Thank you very much.

Thank you, Minister. I want to begin by highlighting a few points on health, and I'll touch on a few other areas as well. Firstly, I want to address the £120 million allocated to health and social services to support a pay settlement for NHS staff. While I and my Conservative colleagues welcome the increase in funding for the settlement, it is frustrating that the Welsh Government has had the money for this settlement all along. What is more frustrating is that the Welsh NHS spent approximately £260 million on agency and bank staff in 2021-22. If the Welsh Government had listened to our calls to establish a workforce plan years ago, there would be additional funding to support overworked NHS staff.

Under the second supplementary budget, the funding allocated towards mental health policies and legislation is £71.3 million, a reduction of £9.4 million compared to the first supplementary budget. We have consistently heard from Ministers that the supplementary budget focuses on priority areas, and so it is disheartening to see a reduction of funding to an area that covers mental health policy development and delivery, including CAMHS, suicide and self-harm prevention, funding for third-sector organisations and the healthcare needs of vulnerable groups, including support for veterans, sexual assault referral centres and asylum seekers and refugees. The cut in funding comes as a Time to Change Wales survey found that over half the respondents had either an experience of a mental health problem or knew someone who did in the 12 months up to the survey.

Turning to education, at a time when Labour Government Ministers have been telling us that raising school standards is an underlying objective of education reform, it is baffling that support for school standards has been cut by over £0.5 million. Additional learning needs has also experienced a cut in funding, despite the National Association of Head Teachers stating that 92 per cent of school leaders reported that funding for pupils with additional learning needs was insufficient. While I welcome pay rise offers to teachers, it is crucial that Labour Ministers do not lose sight of the fact that these strikes are occurring as a direct result of understaffing and overworked teachers. It is vital that more is done to resolve the workload pressures that many teachers are facing and increase the number of teachers in Welsh schools.

From an environmental perspective, again, it is concerning that Natural Resources Wales has had its funding decreased by almost £0.5 million, ignoring warnings that the organisation is underfunded and overworked, even though it's an area that we are expecting them to deliver so much for us on.

Going forward, Minister, it is vital that the Labour Government focuses on funding the priorities of the people of Wales, rather than sticking to empty rhetoric. Only through the Welsh Government's financial backing can we hope to reverse Wales's record of long NHS waiting times, poor educational outcomes and the disastrous housing crisis. Thank you.

Thank you to the Minister for presenting this supplementary budget, and thank you to the Finance Committee for the scrutiny work that they've done, which, of course, is valuable, as usual. Of course, this is the Government's supplementary budget, so it doesn't necessarily reflect the priorities we would want to promote in all cases, but I do think that there are broader messages, which are clearly highlighted in what we have seen in this supplementary budget. 

In the first instance, it reminds us of the lack of flexibility for the Welsh Government, when it comes to responding to the challenges facing us—the restrictions, as we heard from the Chair of the Finance Committee, on the level of draw-down the Government can make from the Welsh reserve, the restrictions on borrowing levels, and none of those has increased or changed to respond to the inflation that we've seen. So not only is there a lack of flexibility, but that flexibility is shrinking year on year, given the current circumstances. 

Another deficit that's been highlighted, and, of course, it is highlighted on a daily basis now, is the lack of budgetary justice. We are talking about a lack of consequentials as a result of HS2. It was good to hear the list of wants that the Conservative spokesperson had; that money would pay for that and more. But I have to say, I'm not encouraged by the response of the Labour Party to this, and the failure of the leader of the UK Labour Party to commit to put right that wrong, which, of course, is in contrast with the Welsh Government's own policy. So, I am sure that the Minister would be more than happy to express her disappointment that that pledge wasn't made by the leader of her party on a UK level. 

Clearly, the spring statement will happen this week in Westminster. We, as a party, have made it clear that prioritising public sector pay is something that is important to us, and I would be confident that, if there is additional funding available, it would be used mainly to that end. I want to echo the message that we heard from the Chair of the Finance Committee in terms of  the recommendation in the report, I think it's recommendation 5, on providing more financial certainty and consistency to local authorities to support those escaping the disaster in Ukraine. Whatever the changes at a UK Government level, we need some assurance in our local authorities.

For me, as a former member of the Finance Committee, I've complained when some of the sponsored bodies approached us and asked for more funding, so I think, in fairness, it is worth noting that funding has been returned in the supplementary budget by the public service ombudsman and by the Senedd Commission too. Like the committee, I do expect the Audit Wales relocation, which will have costs, will bring savings over a period of time. So, just to keep the balance, I think it's important that we recognise that. Thank you.

The second supplementary budget is a relatively minor movement of money, and completes the budget system for the year. I want to just make three very brief points.

I welcome the areas prioritised by the Welsh Government in this supplementary budget and the approach taken by the Minister in managing the resources available as we near the end of the financial year. I would like to agree with the Finance Committee that where money is allocated in Wales, it should be able to moved to reserves or from reserves to expenditure with no Westminster Treasury involvement. Last year, over £150 million was lost to Wales because the Government had not spent it and it was not allowed to be added to the reserve. We need to move away from the Welsh Government being treated as a Westminster department by the Treasury. That's the problem we've got, and I think it's one, as we talk about devolution, that we really do need to resolve. We're a Government and a Parliament, not just another department within Westminster. Can I again urge the Welsh Government to bring a debate to the Senedd supporting full control over reserves? All political parties have supported it in the Finance Committee, and it would make life a lot easier and make the argument a lot stronger for the Welsh Government if they could go and tell Westminster, 'This is the will of the whole of the Parliament.' The committee was assured by the Minister that no money would be returned this year.

Secondly, it is important that overspends by health boards are met from the health and social services budget, but if they cannot, then responsibility falls to the general reserve, because each health board's budget is part of the consolidated Welsh Government account. I think, sometimes, we talk about health boards as if they're something separate. If we were a business, they'd be wholly owned subsidiaries of the Welsh Government, and as such, the Welsh Government has responsibility for their financial position, and they have to ensure that, overall, they have enough money to pay their bills.

Finally, it is very important that the Welsh Government maximises the benefits of money spent, not just spending it.

I call on the Minister to reply to the debate.

Thank you. I'm grateful to colleagues for their contributions in the debate today. Of course, the second supplementary budget is an important part of our budget process. Its approval will authorise the revised spending plans of the Welsh Government and those bodies directly funded from the Welsh consolidated fund, and, of course, it sets the limits against which our final outturn position will be compared.

I'm very grateful to the Finance Committee and to colleagues for their continued support for the Welsh Government's efforts to gain greater fiscal flexibilities, and those discussions are ongoing with the UK Government at the moment. We did have a small step forward, I think, in terms of the end of this financial year, but we're certainly nowhere near where we need to be.

To address Mike Hedges's particular point about the 2020-21 issue, just to confirm again to colleagues—I know that I've circulated a letter to colleagues on this point previously—that, as a devolved Government, we did operate within the DEL budgetary controls set by HM Treasury, and we should have been allowed a reasonable level of flexibility in relation to the individual revenue and capital controls. There were numerous discussions with the Chief Secretary to the Treasury of the time, asking them to allow that additional flexibility, bearing in mind, of course, that 2020-21 was an exceptional year in terms of there being a pandemic and the quite significant increase to the Welsh Government's budget as a result of that.

It is also worth, I think, putting on record once again 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 the Department for Health and Social Care alone underspent by over 9 per cent, returning £18.6 billion to the Treasury. Our Barnett share of that would have been around £1 billion for Wales, so in contrast, our underspend represented only 1 per cent of the available resources, and as I said, it was well within our overall departmental expenditure limit anyway. And I really think that that just demonstrates the importance of those discussions going on regarding fiscal flexibilities, and the importance of this Senedd speaking with one voice in that regard.

I understand the points made by colleagues about the importance of certainty for partners. That's always something we intend to give as much as we possibly can, so we've done that through our three-year spending review process, which I think has given that level of certainty for the years going forward.

One of the Finance Committee's recommendations that I'll have to give more thought to is the one about giving more frequent updates on the levels of funding within reserves, because, of course, that changes all the time, almost by the nature of it, in terms of underspends emerging across departments, and by the time the information is published, it would be well out of date. So, I think that we'll have to give some further thought to that. But just reassuring colleagues that all of this is very tightly managed. I have meetings with the finance director and with officials on a monthly basis, and we get reports from right across Government. So, we are able to keep a very close watch on those figures, but I'm not sure how useful publishing it would be, bearing in mind that it is information that needs to be viewed on a very timely basis.

On the point about the additional funding for health, of course, this is in relation to the exceptional energy costs arising in 2022-23, and the COVID-19 measures that are ongoing in this financial year in respect of the health and social services main expenditure group. That's an important contribution that we're making to meeting those costs. So, I certainly won't be taking any lessons from the Conservatives on how we go about supporting our hard-working NHS staff. You'll see the quite extreme efforts that we've gone to to try and find funding to come to an arrangement with our health workers to ensure that they are paid appropriately. And those discussions, I know, are stalling across the border, and of course, you will see from what we're voting on today that we've taken down all of the funding that we were able to do so in this financial year to meet the costs of that. And I think that that is a really big and important step, but it just shows how far we are willing to go to support our NHS and education workers here in Wales.

In terms of Ukraine, I think that, again, important points were made in terms of trying to ensure that the UK Government provides the funding that is needed to support people coming from Ukraine. They've given no indication that there will be funding for people in their second and third years, in terms of the support that they're offered. There are many aspects with the support that is already offered, which are just not sufficient—for example, treating the family scheme differently to the Homes for Ukraine scheme in terms of the UK Government support in that space as well.

So, Welsh Government, as you'll see from the budget we're voting on today, is providing support well over and above the funding that we've received from UK Government, because we knew it was the right thing to do to provide that initial wraparound support, which was more generous than that which was available across the border. But it's been really important in terms of ensuring that people from Ukraine can avoid the perils of homelessness, and again, that's been something, I think, that has been quite contrasted with the experience across the border as well.

So, just to conclude, we have had to make difficult decisions this year to ensure that the funds available to us are directed to where they're needed most, and we are, of course, committed to supporting our public services, to providing resources for the humanitarian response to the war in Ukraine and delivering the Welsh Government's priorities. Diolch.

The proposal is to agree the motion. Does any Member object? [Objection.] Yes, there is objection, therefore, I will defer voting under this item until voting time.