Cynulliad Cenedlaethol Cymru

So, the papers to note. I would just move to note the papers. Lovely. Diolch yn fawr. 

The third item this morning is the Welsh Government's draft budget evidence session 1, and it's nice to have it within term time rather than in recess, as we've had over the last few years, but a different face at the table this time. So, are you able to introduce yourself and your colleagues, please, Cabinet Secretary?

Just to note that the committee's consultation on the draft budget closed on 29 November and we've had 69 responses, which is up on last year, which is good. It shows there's definite interest out there in this budget. Thank you for the budget that was laid earlier this week.

I'd like to start, basically, to clarify how a more positive settlement has changed the approach this year, the overall principles and the aims underpinning the budget, and how these will be funded and success measured. So, in the build-up to the autumn statement, the narrative was around staff choices and difficult decisions linked to the impact of the higher cost of delivery of services, and how budgets have been falling in real terms. The funding provided to the Welsh Government was above these expectations. So, given the improved funding situation following the UK budget, what are the overarching principles that are underpinning the prioritisation of funding in the draft budget for 2025-26, and how is that prioritisation being reflected in your decision making?

Diolch yn fawr, Cadeirydd. I did try in my statement on Tuesday to set out some of the underpinning principles that had been used in budget decisions. The first is the most obvious, which is that it's my job to try to make sure that funding allocations to Cabinet colleagues reflect the priorities of the Cabinet as a whole, as set out by the First Minister at the start of this autumn term. So, you will see in the budget the real and rapid progress that we wanted to see against those priorities. The First Minister was clear she wanted to make sure that we make an extra push next year on women's health, so there's a very specific allocation in the budget to reflect that priority, and an ambition to accelerate the planning system particularly, so that we're in the best position to take advantage of all the renewable energy opportunities that there will be there in Wales, and there's £5 million—£4 million or £5 million—additional investment in the planning system here to be able to recruit more people, streamline systems and so on. But you will see from those relatively modest allocations right through to the major investment that there has been in the core Valleys lines, the first principle is align your resources against your priorities.

A second principle is to take seriously the Well-being of Future Generations (Wales) Act and everything that it tells us about how decisions today have to take into account the needs of the future, and not just the needs of the present. And you'll see examples of that: the flood prevention programme, with the preventative imperatives of the well-being of future generations Act there; coal tip safety, which is another example where I think you can see very directly the impact of that preventative principle.

The third overarching strand was to align the budget with ambitions for growth. We know that the Chancellor in her budget in October said that the investment that she had released into the economy was an investment to drive growth back into the UK economy, because the UK economy experienced that period that economists called 'the golden boom' from the end of the 1940s right through to the start of this century, over 40 years of trend growth at 2 per cent to 2.5 per cent. Since 2008, it's been less than half of that. So, the budget is a budget to restore the UK economy to the path of growth, and I wanted to make sure that this budget, the Welsh budget, aligns ourselves very directly with that. So, there is the very significant additional capital in the budget, and I wanted to make sure that was aligned with creating the conditions that will allow the Welsh economy to grow alongside the UK economy.

And then, the final principle—and it will always be a principle for a Labour Government—is that we want the investments we make to do the most good in the lives of those people who have the least. And there's a distributional analysis report. Chair, I have brought with me a series of documents that go alongside the budget, thinking it would be useful to refer to some of them today. And the distributional analysis of the spending here is very clear that, across that range of major responsibilities, whether it's health, schools, higher education, social care, bus services, this budget provides the greatest impact upon the 20 per cent of the population who have the least. That was another principle that you'd expect a Labour Government to apply to its spending decisions.

Peter. 

Thank you, Cabinet Secretary. We seem to have been talking quite a lot about budgets this week—it's that time of year. We all acknowledge that there is a lot of extra money coming in this year, which, no doubt, is very much welcomed by many service areas. Talking about growth, permanent, sustainable growth needs people. It needs people, it needs training so that growth can be continued and taken forward. I'm anxious that only a portion of the new moneys will create the growth baseline, and it's not necessarily recurring. So, how do we establish a long-term growth pattern with this additional uplift now that can be sustainable to maintain growth after we have to revert back to, perhaps, a less generous position? So, I'm slightly wrestling with how new money—. It can do good in-year and it can alter certain things, but real sustainable growth will require people. How do we use that money in the longer term? 

Thanks to Peter Fox for that question, Chair. Look, capital expenditure by its nature is one-off, so a lot of the budget is inevitably there. I myself firmly align myself with the Chancellor's belief that growth in a modern economy of the sort we have in the United Kingdom is driven by public investment in core things like infrastructure, connectivity, digital and so on, and, if you don't have those platforms, then private investment doesn't arrive. You use public investment to crowd in private investment, and that's how we've tried to use the capital in this budget.

But the other part of the equation, as Peter Fox has said, is the supply side, in terms of people to do jobs. This is a really important debate that I don't think we've yet completely grappled with here in Wales. I've sometimes said that maybe the single biggest change in my political lifetime in this area is this: for most of the time I've been involved in politics, we've thought that the problem we face, particularly with young people, is finding work for young people to do—there weren't enough job opportunities. You'll remember all those programmes that we've had over the years; I used to send my young people, when I was a probation officer, to the youth training scheme, to the youth opportunities programme, all of those things. All of those were attempts to find work for young people to do, to set them off. The future is where there will be not enough young people to do the jobs that are there. So, that business of making sure that we don't waste a single person in the Welsh economy, and we try to bring some people who are currently economically inactive back in to active participation in the labour market, I think is going to be the challenge of the next 20 years—the mirror image of the one we've grappled with previously.

There are lots of things in this budget, I think, that do align themselves with that—the £144 million that is there for the apprenticeship programme, the realignment of the apprenticeship programme that's gone on over the last couple of years, away from level 1 and level 2 skills; we do very little of that now. There's the extra money that's going into degree-level apprenticeships. And it's recurring money in the budget, which means that we are investing in the workforce of the future. But if the future is one where there are fewer people in Wales to do the jobs we need to do, there's a significant restructuring going to be needed inside the Welsh economy, to free up labour from the less productive parts of the economy, and to make those people available to take up jobs—I've heard Mike Hedges say this many times—in the life sciences and other parts of the Welsh economy that offer us greater opportunities to make productivity gains.

Following on from your logic there—and I don't dispute the logic that there'll be fewer younger people—as a result of that, younger people are moving to larger urban areas to get to that work, so it exacerbates depopulation in our rural areas, which then drives the funding formula for local government, which then has an impact on providing the services for those people. So, it's an unintended consequence of the mechanisms that we've got. I'm wondering whether or not there's something that needs to happen to rebalance some of that, to try and keep our young people, potentially, in those ruralities, especially using the life sciences, using technology, and being able to do that. But if the unintended consequence of creating better services and everything in urban areas really makes living in rural areas harder because the services aren't possibly delivered as well—. Maybe you could just think that through, and see—. Do you agree with my logic there, or not?

There are a couple of points there, I think. You're right to say that conventional economic thinking in more recent times has all been about agglomeration, hasn't it—that the regions that do best across Europe are those regions where there's a concentration of people, particularly high-skilled people, within a relatively small travelling distance, which allows those areas to thrive. It's why we talk about the Cardiff capital region; it's why, indeed, we made that investment in the core Valleys lines. Again, there was a very long time when Welsh economic policy believed that what we had to do was to take jobs to people. The core Valleys lines is about taking people to jobs, and that's driven by that agglomeration theory.

There are two ways in which I think we are fortunate in Wales to be able to make some inroads into the downside of that, which is the drawing away of people from other parts of Wales. One is the renewable energy possibilities of the future—those jobs will be on the western side of Wales, won't they? Those will be jobs that work with Welsh geography—wind, waves, floating offshore and solar. Those jobs are going to be in places of Wales where we've struggled to find them in the past. So, there is something there that I think is going to be on our side in rebalancing that.

The other thing is that the new ways of working that the pandemic drove also make a big difference here. In the Arfor scheme, which was part of the co-operation agreement, you'll know that in north-west Wales, they are piloting the idea of offering people £5,000 to attract people back to parts of Wales. My conversation with the people who are running that is that the £5,000 is used to invest in those infrastructure things that allow you to be, let us say, a solicitor on the Llŷn peninsula just as successfully as though you were sitting in an office in Manchester. Because different ways of working, particularly digital and Zoom, all the things we're used to, mean that you don't have to move in the way that you previously did. So, I think there are some countervailing trends in the way jobs are being created and people live their lives that will help us to prevent the downside of agglomeration, meaning that people always move in Wales from west to east.

But that doesn't always help with social services, with roads, with schools and that aspect. It's a longer term view. If we're decimating, potentially, some of these communities, it gets even harder to get people to move back or to stay there in the first place.

Yes. And finally, Chair, on this, because this is really interesting stuff for me, when you talk to the people doing it on the ground, you see there's another dimension as well. One of the reasons that people don't live in rural communities, particularly young people, is not because the roads aren't good enough and not because they can't get their Zoom connection to work, but that it's more exciting to live in Cardiff, because it's the cultural and social aspects that drive people to larger areas, not just the physical conditions. So, there are life stage issues here. These things are more important to you at some points in your life than they are at others. It's a strategy for repopulating rural parts of Wales at the point in people's lives when some of the things you get in big cities are less important to you and some of the things that you need, because you've got children to bring up or you've got parents that you want to be closer to, become more important to you.

Is it on this point, Mike? I know that Peter wanted to come in on this point.

It's on this point, but moves slightly beyond that. But on this point, you only have to walk around this building and you see the Llŷn is moving to Cardiff person by person, and I think that is a huge demographic movement.

I hope you will agree with me that skills and productivity are the key, and we have to do that. But the other point I was going to make is that we talk about the 1950s as a period of great growth, but growth in the 1950s of GDP varied between 1.5 per cent and 5.5 per cent during those years. It's always been a jagged movement—good years and bad years—and sometimes it's had very little to do with Government action, if you've had good years and bad years. How can we flatten it or try to flatten it out?

I'm not honestly sure that any Governments have ever managed to smooth out boom and bust; you can try and narrow it. But Mike Hedges is absolutely right, Chair; when I talk about the golden boom, that is a line on a graph that smooths out all those ups and downs and just gives you what it averages out at. I think successive UK Governments have had the ambition of trying to narrow the gap, but the gaps are almost inherent in economic cycles, and I don't know that you can. And, in any case, as Mike Hedges said, the UK economy is completely exposed to things that the UK economy cannot control. There'll be a new president in the United States in a few weeks' time, there will be a set of economic policies there that will create new economic winds around the globe. The United Kingdom is not in charge of those, and we're quite exposed to them.

A closing point on that from me. The Cabinet Secretary quite rightly points to the Cardiff capital region. The reason I was part of bringing that forward was to do exactly what you've identified that was happening—how do we create jobs and opportunities in areas where we're losing them, so we can retain our social capital within the region, so we don't lose it to Reading, Swindon, London, and keep it there. The connectivity of the metro and everything was to facilitate that. If you think half of the Welsh population lives in a block 60 miles long, 30 miles high, if any part of that area does well, we all do well, and those were the fundamentals behind it. So, I think maintaining a focus on city deals and growth deals is really important to drive growth and jobs in those areas. Sorry, I shouldn't be answering your own question.

And in terms of the budget, to get back to the original question, there's £85 million in this budget to support city and growth deals across Wales next year. Half of that comes directly from the UK Government, half of it is the Welsh Government's contribution, but it's there in the budget to be drawn down by those city and growth deals when they are in a position to do that.

Thank you for that. You mentioned the distribution analysis, and it is useful to be able to do that, from what I can see, but this is the fourth year that you as a Welsh Government have produced it. What insights do you get from that annual distribution analysis of public spending by income group? And how does that help inform your decision making? Do you use it after the fact to say, 'Oh, actually, we've got this right', or do you design your budget around, 'This is going to make the biggest impact here'?

I think all my Cabinet colleagues, when they are looking to make new investments or looking to review the way their programmes are working—. The question that will always be in the mind of my colleagues is how is this spending helping those who need that help the most. So, it's not a retrofit. What the analysis does is to bring all of that together and show you the cumulative impact of all of those different spending decisions. It does then allow you to look through that lens. Lots of the value of the different documents that we publish, Chair, it seems to me, is that it provides you with a different series of lenses through which you can look at what is a very complex £26 billion worth of expenditure. And what this does is it allows you to look at the cumulative impact of our spend through that distributional lens.

The one part of our expenditure that stands out as not having that pattern—being biased towards people in the bottom 20 per cent and the people in the top get the least benefit from it—is rail expenditure. I think it will be very interesting to see, over the next few years, as the metro is complete in south Wales and we see some of the things that Peter Fox mentioned and the ambitions for it come to fruition, whether we will see that change. There's a significant uplift in the farebox of Transport for Wales this year in the core Valleys lines area, because the new trains are there now, and they're running there and so on. It will be interesting to see whether that aspect of the distribution analysis changes as different people are able to use that investment to secure their economic futures.

And if it doesn't, would you expect to see the Cabinet Secretary change tack?

There was an interesting discussion on the floor of the Chamber about the distributional impact of bus spend and rail spend. Changing tack in the transport field is quite a long-term thing to do, because so much in rail is sunk in fixed assets, and it's very hard to save any money in rail because passengers are only one component of the costs that the railways inevitably clock up for you. But I think it will be interesting to see that and to see whether, from a distributional point of view, the balance between rail and bus is the right one. But the investment in rail in south Wales, in the core Valleys lines, surely is about making those services available to a wider range of the population.

Great. Okay, thank you very much. Moving more to the high-level stuff with the budget itself, can you explain how the updated baselines of the year-on-year changes in funding allocations are calculated, and why you’ve chosen this approach rather than using the latest supplementary budget as approved by the Senedd? Because it’s a—[Inaudible.] And I don’t know if you’ve had time to look at Guto Ifan’s analysis—which only came out yesterday, so, you might not have seen it—again, comparing. If you add in the baselines, then the extra money that you’ve announced, and the extra funding that you’ve announced, isn’t as big, when you put those baselines in of the in-year additional funding that’s been put in since the last final budget. So, just your thoughts on why you’ve presented it in that way.

I’ll probably ask Andrew to explain the technicalities, and I think Andrew has had a chance to look at the Wales Governance Centre analysis, and I have not.

I’ll just make just one point here, which is I think that next year’s budget actually understates the impact of funding over these two years, because we’ve had a significant amount of additional money available to us in-year this year, which means that the platform for next year is higher than it would normally have been. We’ve had more money in-year than in any year I can remember for at least a decade. So, we start next year from that higher platform, and the percentage uplifts therefore look smaller than if you hadn’t taken into account that in-year spend. I think I’ve said—I think I've offered—the comparison before: there’s a 4.3 per cent increase for the local government settlement overall next year, but if you don’t take into account the additional in-year allocations—so, if you compared the start of this year with the start of next year—it’s 7.7 per cent. It’s 4.3 per cent because we’ve taken into account and baselined the additional funding that’s come in in-year. So, I think it actually rather understates the impact of the additional funding we’ve had rather than overstating it. But Andrew will explain the technicalities much more—

Before I bring Andrew in, I know the UK Government, when they were presenting figures for the autumn statement, I think they presented 2023-24 and 2024-25 and 2025-26. Is that something that you could provide for us, just so that we could see that, to be able to compare year on year, in the same way as the UK Government did in their budget? Is that something that can be done?

Yes, absolutely. 

There we are. Great. Thank you, Andrew. 

Maybe we'll just have a conversation with the committee clerks, just about exactly what analysis you want to see.

Yes, that would be good; we'll take that offline and do that. But, if you could talk to us about why it's been presented in the way it has. 

Yes. I guess there is always a choice to make about exactly how you present comparisons between years to try and be as meaningful as possible. That’s kind of the intention anyway, and to be as transparent as we can. So, in our tables, what we’ve shown is—. There are, basically, three steps. So, you’ve got the final budget from last year, and, then, you’ve got baseline adjustments, and then you’ve got 2025-26. And the reason we’ve done that is just that the picture has changed very, very significantly from the final budget for 2024-25. We’ve made very significant allocations for public sector pay, for changes in pension costs, and for a number of other things. So, there’s about £600 million additional that’s gone in to resource baselines, before we’ve then added on the 2025-26 allocations, and so we—. Not all of those allocations have been approved by the Senedd at this point. So, that was—. We thought about that quite carefully, because, obviously, budgets need to be approved by the Senedd before they’re kind of real, as it were. But we wanted to avoid showing misleadingly large shifts between 2024 and 2025, because that's not what people will experience. Local government, as the Cabinet Secretary has said, they'll be getting that £130 million in the current year into their baseline, so the £250 million on top of that, that is the actual growth that they will see. But compared to the position they were in at the start of this financial year, they've seen both of those steps before you get to the 2025-26 level. So, we've tried to strike a balance, I suppose, between not getting too far ahead of things in terms of budgets that the Senedd hasn't approved, but trying to show something that's as meaningful as possible. But I do think the 2023-24 comparison in addition would be a useful thing, to be able to see the picture. But it's not the only relevant comparison. I think it is useful to see the actual steps, because it hasn't been a smooth path from 2023-24 to 2025-26.

Well, anything that you can provide that shows those steps, that might be useful, then, if it's not just year on year, but that you show the intermediate steps. I think that would be useful for us to understand exactly the position that we've got. Because we get announcements in-year, and it's the job of this committee to see what are the trends and to try to get as good a position as we can of understanding what the Government's doing. 

Could I just respond to the point about Guto Ifan's analysis? 

Yes, certainly.

So, that note was just picking up a couple of things, but one of the points is that not everything that's being allocated in 2024-25 is baselined. Some of those are one-off funding allocations for things that don't recur, and so we haven't included those in baselines, because they're not baselined allocations. So, for example, some of the allocations announced in recent weeks in relation to trying to do more this year to deliver stuff that the First Minister is prioritising, not all of those allocations are baselined. So, I think that that explains a lot of the difference between the baseline changes and the overall increase in funding in 2024-25. And the other point is that we're still holding a bit of contingency that will be allocated later in the year. And you'll see all of this in the supplementary budget in February. 

Does that go to the nub of—? I think that it was in the debate the other day when I agreed with Mike Hedges around that line by line and seeing what is baselined and what's not, that detail. It's just having that detail available to be able to then help people like Guto and the academics who are out there analysing these things and helping to shape the discourse around the budget to be able to actually see transparently those positions and maybe then to come to different conclusions from what he's come to in his paper. 

Okay. I'm very happy for as much information, and for Andrew to supply it. But I would like to make just one general point, if I could, Chair, because I've heard some suggestions on the floor of the Senedd as well that sort of suggest that the real comparison for next year's budget is not with this year's budget, but with 2023-24. I just want to be clear that the exercise that the Welsh Government went through this time last year is not a—. This year's budget is not an aberration. My aim in finding money for next year was not simply to take us back to where we were before this year happened. The really painful stuff we did last year was about reshaping and resizing the Welsh Government budget to live within our means over future years. And I've resisted with my colleagues suggestions that what we should be doing with the money that we've got available next year is to go back and fill the holes that we had to create in order to make this year's budget viable. So, there is some of that, of course, but my aim for next year was not simply to create the year before this year happened. What we had to do last year was more fundamental than that, because at that point we were facing the prospect of austerity continuing for another five years. So, by all means let's have the figures, but I don't think that we should mistake the mission. The mission is not simply to take us back to where we were before the problems hit us.

Okay. I want to move on. I've been hogging a lot of the questions, so, I'm going to ask my colleagues to come in shortly. [Interruption.] Sorry? It is very interesting, yes. Before I hand over to Mike, you talked about prioritisation and the way that you've used the First Minister's priorities in setting the budget up, obviously, as a consequence of that, you've deprioritised some areas. What's been the hardest deprioritisation you've had to make?

There's very little in this budget where people have had to deprioritise in the sense that we used that term last year. Last year, we were using that term to denote the fact that people were having to cut budgets and things—there's very little of that in this year's budget. Are there places where, if we'd had more money, we would have done even more? That's more, I think, how I would see that question. Well, there's £20 million in this budget for childcare, but there are two pressures in childcare: there is the pressure to raise the hourly rate for providers, and there's a pressure to extend what we're doing in Flying Start childcare to reach more children in phase 3, and the £20 million doesn't allow us to do, completely, all of those things. So, childcare has not been deprioritised—it's getting £20 million more than it would have done without the budget—but if you ask me for an example of where, had we had even more money to disperse, I might have gone to provide extra, I think that's one example of where more money could have been used to do even more next year.

Okay, thank you. Mike Hedges.

One of the benefits we've had in terms of income is the freezing of allowances, and that really has made a big difference. If allowances, or when allowances, get unfrozen, that will have an effect on the Welsh Government budget, won't it?

The thing I was going to ask you, and you're going to say that it doesn't all come under you, but, if we want to increase our taxation income, we need to increase wages and reduce inactivity rates, and we have a mindset amongst many people that, although the retirement age is 66 for people in work, 60 is not a bad age to retire and 58 is slightly better. I think that that is one of our inactivity problems. Is there anything that the Government are doing in this budget, or anything that we can discuss at a future time, about how we can actually get people working longer?

Well, I don't know that I can point to something about trying to make people work longer, but there are certainly things that we are doing and want to do more with our UK colleagues—as, Mike is absolutely right, the levers here are not entirely in our own hands—to try to persuade more people to come back into the productive economy. 

There is a real UK phenomenon here. Other countries have seen a growth in economic inactivity post pandemic, but ours far outstrips what has happened elsewhere. The reasons are complex. We know that some of it is lifestyle choice, as Mike says: people settling for lower incomes in order to get more leisure and do other things in their lives. But the biggest growth of all is in those people who are outside the workforce because of health reasons, and that is mental health as well as physical health.

So, there are things in this budget that continue to invest in those areas to try to accelerate people's return to health and therefore return to the workplace. There are initiatives that our UK Government colleagues are very keen to take in this area, and we will want to play our part alongside them in trying to find ways of making that path. I think the approach of our UK colleagues is that the stick approach has gone as far as it possibly can. The difficulties of getting into the benefits system and being sustained by it are absolutely real. So, what we have to find are just better ways to help people to come back into the workforce, rather than to penalise them when they leave it, and we'll be very keen to try and play our part in that sort of approach.

This is a much shorter question: what progress have you made in implementing the planned vacant land tax in Wales?

The vacant land tax was completely stalled in the latter stages of the last Government. I had a meeting at the end of November with James Murray, who is the Exchequer Secretary who is responsible for this, and there was an opportunity in that meeting to focus on the vacant land tax, and I think it was probably the longest agenda item in my discussion with him, in which I explained again how the idea had come about and how we had hoped to use it to test the machinery of that 2017 Act. He gave me a commitment that we would look at it again for real, and a detailed meeting has since taken place between our officials and Treasury officials at the start of this month. Now, I cannot say to the committee today that that means we are going to reach the destination that we think is the right one, but I think I can say much more genuinely than we would have been able to in recent years that those discussions are now happening, and happening purposefully.

Can we raise the fiscal framework again? There are two things we've continually asked for—both you as a Government and us as a committee—but neither of which costs the Government any money. One is for an increase in the borrowing ability and also, perhaps more importantly, the ability to move money into and out of reserves in exactly the same way that Swansea Council and Monmouth Council and Blaenau Gwent Council can do. It doesn't actually cost the Government any money to do that. It comes down to the Treasury still treating the Welsh Government as another central Government spending department. Have we made any progress on that?

We made progress in this way, Chair, that is in the manifesto of the UK Labour Party going into the election, to attend to greater flexibilities in the way in which devolved Government budgets are managed. That was a discussion at the Finance: Interministerial Standing Committee back in October. It's a substantive item on our agenda, and the FISC meets early in the new year.

On the first point, the capital borrowing, for some years this was a relatively theoretical issue because either we didn't use those borrowing facilities, because capital arrived right at the and of the year from the UK Government and we didn't therefore need borrowing, or the cumulative borrowing was still well below the overall limit. Actually, if we continue to borrow at the current rate, of £150 million a year, and there's no change in capital borrowing, we will hit our ceiling now sometime in the next Senedd term. So, this is a much more coming-straight-towards-us issue and has a greater urgency in that way.

Based on borrowing there, is that one of the reasons why you're using local government borrowing powers and funding the payments for that? Is that a way of managing that capital borrowing, or is that something completely different?

It isn't connected to that issue, Chair, because we are using the full £150 million borrowing requirement next year. So, using local government borrowing capacity is to allow us to do even more next year, and particularly to do it in that area of local roads and pavements. But the borrowing issue, I'm just suggesting to the committee that Mike's point about it becomes more pressing every year because we get closer to the limit.

Did it help to have the debate yesterday and the report that we produced?

Yes, it was very helpful to have that yesterday, and I think I was able to say to you as we were leaving the Chamber that I've asked my officials to send the report. You will be sending it to your committee colleagues, but I have asked for the report to go to ministerial colleagues in Scotland, Northern Ireland and in the Treasury, so that I can draw on that report in the discussions we will have in the FISC.

Okay. Thank you.

I just want to move on to preventative expenditure, and some things are preventative even if they don't appear to be so, like money spent on social care, which is not only about people coming out of hospital, is it, it's about people not ending up in hospital because they're getting the social care prior to that. I know it's not under you and it's under spending Ministers, but there's a general principle of actually trying to increase preventative spend with the money you've provided to the spending Ministers in order to help the whole of the budget.

Chair, this is a conversation that I am quite keen to pick up with the committee, because I remember sitting here in 2016 and having this conversation for the first time when we talked about how can we re-orientate the budget so that more is spent on preventative work, and we did some very useful work together, particularly with the well-being of future generations commissioner at that time, and arrived at an agreed set of definitions about what we mean by 'preventative spend'. I find this a very slippery concept, myself, because I can describe almost everything the Welsh Government does as being preventative in one way or another. I remember having a debate with the then committee about whether an orthopaedic surgeon carrying out hip and knee replacements. Is that preventative spend? Well, inside the health service, that is right at the opposite end from preventative spend, and yet, if it prevents somebody from going into a care home because they're now able to manage in their own home, then there is a really strong argument you can make that that is preventative. It's preventative not simply in social terms, but it's preventative in economic terms, as well, because you don't get all the expenditure that goes with having to be in residential care. So, as I remember it, the well-being of future generations commissioner helped us to agree a four-tiered approach to prevention. I would find it very useful at some point to have a chance to have a longer discussion with the committee about whether that typology is still the best one, is it the most useful one, does it need to be revisited and updated and how can we then apply that lens again to next year's budget, because I am very keen, my colleagues are very keen, to move money in a preventative direction, but it's sometimes a harder concept to use in practice than it is from the headline idea.

I've got to say—

Sorry, Mike, you carry on. I've got something else to ask.

I think that's something that I would certainly like to do in detail. I'd also like to look at strategic impact assessments in detail. If I went through all the questions on strategic impact assessments, you'd be leaving and Peter Fox and Hannah would not have had the opportunity to come in. [Laughter.] So, I'm not going to do that now, but I think they are things that it is worth us talking to you in detail on, having an hour on just those two.

You talked about preventative spend, and one of the biggest vehicles of preventative spend is local government—keeping people in their homes, doing social care, childhood obesity programmes, those sort of things—and I was listening to the radio on the way in this morning and the leader of Ynys Môn council was talking about where non-statutory spending might have to be cut if the funding doesn't allow, and that feeds into that preventative spend. A lot of the correspondence that we've had from our consultation, just skimming through it, talks a lot about national insurance contributions, especially for the third sector, who may be carrying out contracts for local government, who are doing that preventative work that keeps people of hospital, that keeps everything else going. So, could you talk to us about that national insurance contributions cliff edge, potentially, where we don't know—you've said yourself that we won't know until May or June next year—as to whether or not there is going to be any money coming through. How do you square that with local governments having to provide balanced budgets this year and those third sector providers who are working in tandem with local governments who are looking at an invidious position where they're going to have to try and balance a budget, possibly make people redundant, because they can't make it work, but then, maybe in June next year, there'll be some money coming through that would've stopped them from having to do that. And whether or not you could see the UK Government—. You've talked about passporting it through to local government, but will that include those services that are contracted out? So, just your thoughts around that and addressing some of those real concerns.

Well, Chair, I'll try and summarise some of the things that I was saying yesterday on the floor of the Senedd, because there are things we will not know and do not appear in this budget. But it's not that we know nothing. We know, for example, that 53 per cent of all employers will not be affected at all by the national insurance contribution rise, because of the rise in the employment allowance. A quarter of a million employers will be better off as a result of the changes that the Chancellor made. And we know that workers who are within the ONS definition of a public sector employee will be covered by the Chancellor. So, it's not that we know nothing.

So, all organisations will have to make risk-based decisions as they prepare their budgets for next year. I think, Chair, maybe it was you who asked me a question when I was in front of this committee earlier in the term, about why the Welsh Government made the assumption that we would see the pay deals that had been agreed in 2023-24, why we expected the money we'd have for those pay deals to be reflected in this year's budget when we didn't have that certainty from the Treasury at the point when our budget was laid. And that's because I made—or the Government made—a risk-based decision that we couldn't see how the Treasury couldn't—. We couldn't see how they could avoid giving us that money, but we didn't have a letter or a guarantee of it. We made a risk-based decision that the money would come and we constructed our budget accordingly. I think local authorities will want to do that. They will look to see the ONS definition and their own workers and make assumptions against that. I equally think that there will be organisations that, if they're planning, will need to plan on the basis that they won't get help from the Treasury, and if they do, well, then they'll be in a better position than they are and they will be able to use whatever help the Welsh Government has been able to provide to them. So, there is extra money for the third sector in this budget. It is not money for the third sector to pay national insurance contributions, but third sector organisations faced with those decisions will need to construct their budgets accordingly.

Peter.

I absolutely respect your position on where you are, and it's a difficult position for you, as well. I know you're going to passport money through if it comes. Why do you think there is this—? I know we might hear something in May or June, but whilst the commitment's already been made in Westminster, what is the barrier for them to give more clarity for us to be able to —? Because it is fundamental, because it will alter the decisions that local government will make in setting its own budget, at the moment. They may not invest to the degree that they would've done in certain service areas, because they'll have to hold back, just in case, especially if they haven't got the reserves to cover it if it went wrong. So, why do we think they are reticent to say, 'Don't worry, guys, you're going to have it. There may be some flexibility around our definition of OBR and how it might'—not 'OBR', but whatever the definition is '—how it might affect you, but the bulk of the money will be coming'? Have they given us that reassurance?

Andrew is probably closer to the day-in, day-out discussions. 

Yes. I mean, it is purely just a matter of the UK Government accurately calculating the actual costs to public sector employers in England of the increase. It does seem a bit surprising that it takes—. I think there's a bit of expectation management going on here. I would hope that we would hear sooner than spring next year, because it seems hard to believe that it's going to take that long to get all of that information. But, they want to make sure that they get the numbers right, I suppose, and that will take a little bit of time, and then, obviously, our number depends on what that number is.

Is that because it's Barnettised, rather than—?

Yes. So, the commitment from the UK Government is that we will get a Barnett share of the costs in England.

So, we have to wait for England to decide what they're doing and then—

Yes. Like I say, I think what we're waiting for is just the calculation, gathering information and calculating what the impact is, and it's probably a little bit more complicated than we all think it is. But it seems hard to believe that it's going to take until spring next year to get that.

It might be ready for the budget, though, perhaps.

Maybe.

And in your best estimate, have you done any calculations, or helped local government with those calculations yet? And do you know what you need to cover it? So, if the Barnett figure comes in at less than what local government needs, have you got contingency there to make up that difference?

Some work has gone on inside the Welsh Treasury, with Andrew and his colleagues. We're nearly at a point where that is in a position where I can share it with the committee, and I'm happy to say that I will write to you before Christmas with whatever figures we have been able to—when we have nailed down the figures of the sort that you've described. We should be able to do that in the next few days and then I'll send them to you.

And, will those figures then—? So, if the Barnett consequential is less than what's needed—that's one question. And then, the other question is: if you've calculated the global number for Wales, so that figure that you think is needed for local government, is that going to follow the RSG, or is that going to be what the actual councils need?

Can I say, Chair, that there's a prior question even to those two, for me? It may be the Treasury's position that the way to do this is to fully compensate public authorities in England and then to give us a Barnett share of that, but that's not my position. My position is that if public authorities in England are getting 100 per cent compensation, then public authorities in Wales should have 100 per cent. So, you're right that the Barnett share may turn out to be less than we need in Wales. That would seem to me fundamentally unfair that English public authorities know that they're getting everything covered and, in Wales, we're left dealing with gaps and things to fill and decisions about how best to do that, through various formulas and things. So, we will be watching, as Andrew was saying, very carefully, the figures and how it all works out. If things work out in the way we've just described where Wales doesn't have full cover, whereas English public authorities do have full cover, well, I won't simply be leaving it there.

There we are. So, are you in conversations, or is Jayne Bryant, as the Cabinet Secretary, in conversations with local government to make sure that you've got that accurate data to be able to do that?

We have had discussions with the Welsh Local Government Association about the costs that local authorities expect for directly employed staff, so we should be able to share those details with you shortly.

Especially because different local authorities have different levels and may have made different decisions because they're trusted to make those decisions in the way they do.

Indeed. That's quite true.

Okay. Thank you. I'll move on to Peter Fox then, please.

Right. So, just to look a bit at climate change, if I may, and carbon reduction. Recognising that there's a significant amount of capital available next year, which is really welcome, have you assessed your previous commitments and aspirations associated with the net-zero plan, either in terms of timing or scope of projects, and how is this reflected in the budget?

Well, Chair, the way we've done this is through the 'Infrastructure Finance Plan 2025-2026'—here's another document the committee will have to enjoy. So, we have a new document for next year, setting out all the infrastructure decisions that we are now able to make. Some of those expenditures have a very direct connection to carbon and the net-zero ambitions of the Welsh Government. There's £22 million in there for local energy projects; there's £203 million in there for the decarbonisation of the housing stock; and I think it was just last week that Vikki Howells, as the Minister responsible for further education, announced another £10 million for decarbonisation in further and higher education. So, in the 'Infrastructure Finance Plan', there will be some aspects that are absolutely in this field, but there will be others that are not directly, but where the decarbonisation dimension of that spend is directly accounted for in the plan.

So, I had a chance to look at the plan in the last couple of days in a bit more detail than I might otherwise have done. Decarbonisation doesn't appear against every item, but if I flick it open completely randomly, which I've just done, so it's opened on 'Chapter 8: Economic Development', in the first item listed here, which is the investment in business support, I see that decarbonisation is specifically identified as one of the drivers for that expenditure, and it explains how, and then there is a piece on the circular economy, where it isn't. But it's a very, very regular, on-the-surface consideration that you see listed against the specifics that are here and that cover the whole of those investments next year. 

That’s good. I’ll look forward to having a look at that around the carbon reduction. Obviously, one of the other elements of this is climate change, and how that might alter your thinking now around reprioritising capital spend in certain areas. Obviously, we’re all seeing the change manifesting in huge extremes of weather, which suddenly create a huge set of new burdens that we never really had to live with before. How are you prioritising the investment in the future, if you like, futureproofing against climate change?

Well, I think Peter Fox makes an interesting point. There is a new document that the Welsh Government has published this year, the 'Climate Adaptation Strategy for Wales', and my memory of the discussions around that is thinking that it's actually less well advanced in relation to adaptation, than it is in trying to prevent future further deteriorations in our climate position. But the strategy is what aligns with the Net Zero Wales plan, and, therefore, is reflected in the decisions made in the finance plan for infrastructure. And you do see some—. The £25 million additional for coal tip safety is all about making sure that—. The way this seems to me, Chair, is that the majority of Welsh coal tips were made safe in the 1980s and 1990s, and they were made safe to a standard that was probably reasonable for the climatic conditions that were prevalent at the time. The problem is that the climate has changed and those tips are no longer as safe as they need to be. So, the £25 million and the money that the Welsh Government will provide is about adapting those protections to make sure that they go on being safe for the future.

Yes. It's very difficult to get the quantum that you’re going to need to go forward, I suppose. But it’s useful that there is some significant additional capital to start preparing for that, I think, perhaps not the coal tips as much, but things like the culverts and all of that refurbishment and things like that. I suppose that is very much in your mind and in your budget prioritisation.

Very much. And I haven’t mentioned retrofitting in the housing field, which is probably one of the major ways in which we will be adapting our infrastructure for future use.

Moving on to public sector pay and Government staffing, a quick question, really. Does the draft budget provide any additional resource for Welsh Government staffing? And, I suppose, I’m having to reflect on areas that you might have felt were under capacity or areas where you've got to think about where you're going to need further capacity, for Senedd reform and things like that.

So, the budget does, Chair, provide some additional support for the central services main expenditure group. The civil service had a pay uplift of 5 per cent, and this budget does meet that in full. In terms of decisions made over the longer run of investment in the Welsh Government's own capacity, it has been a principle of mine from the time I became the finance Minister last time, when were already more than five years into austerity, and it's continued into this budget, that, in difficult times, we should not treat the Welsh Government any more favourably than we were able to treat any other aspect of the Welsh public service. There are always demands for more expenditure, there's always more that you could do, but I never wanted to be in a meeting with, let's say, local government leaders where they could say, 'Well, you're looking after yourself pretty well, whereas we are having to make those much more difficult decisions.' So, it's been a principle of mine that we don't put ourselves in that position, that we don't treat the Welsh Government any more favourably. Does that mean that there are places where the system is under stress, and has been under stress? Well, it does mean that, but so has every other public service. The Welsh Government is no exception to that.

So, for example, in this budget, there is £4 million to £5 million for investment in planning, and that's one part of the Welsh Government where you could say that you see the stresses and strains. Planners are hard to recruit, they're very skilled people, they often have other job opportunities, and we probably haven't had the investment in that area that allows us to do all the things we would like to do when we're talking about renewable energy, getting consenting regimes in place for that and to be able to accelerate growth. So, there is some investment in that.

Again, it's my responsibility, so let me say that I took a decision, in relation to all the new responsibilities that came to Wales via Brexit, that some of those were real responsibilities, and some of them were, really, theoretical responsibilities. To give you an example there, amongst the responsibilities that came to Wales was a new responsibility for dealing with things that were previously dealt with under the EU chemicals directive. Well, I could not myself see how, even if we'd found the money and employed a whole load more people, we were going to have a specifically Welsh approach to chemical safety. You could say, 'Well, it's your responsibility, it's the Welsh Government's responsibility now', but I couldn't see how there was going to be a different Welsh regime, so I didn't fund that. Other things were funded, because they were real, and they were choices for us to make, but not everything. Not every responsibility in a policy area means you're going to do something different.

So, you are right, Peter, there are some examples of where we haven't been able to do everything we would have been able to do in better times, but I think there's a strong rationale for why we did that.

Just on that, some of the things that we see as a committee—and I've sat on different committees, and Peter has, and we all sit on numerous committees; we have the Chair of LJC here as well—and looking at legislation and drafting, and when we're producing regulatory impact assessments for Bills, people under pressure might make mistakes, and those mistakes are picked up in scrutiny, but it takes time then to unpick some of that, and it's inefficient. Is there a rationale, from a preventative spend, to look at some—? And I take on board what you're saying, but it's that preventative spend in making sure that laws that are drafted here are done well. It's just a pushback slightly on that element.

Sure, sure. It's my belief that those difficulties are not primarily resource difficulties. I think there are ways in which we've built up a pattern of legislation in the Senedd since 2010 that needs to be revisited. We've produced this small number of very large Bills that get weighed down by the most difficult aspects in them. Everybody in the policy end of the Welsh Government worries that if you don't clamber aboard that Bill there won't be another Bill around for another 10 years, so you better get on it while you can. That slows down the progress even further. It adds to the complexity, drives some of those pressure points. I don't myself believe that resource is the fundamental difficulty. I think there are patterns of doing things. We've only been at this for 10 years and now is a good point, I think, to look back and to see whether or not there are better ways of using those resources to address some of those problems. Putting more money into it I don't think is the first port of call.

I think that's probably a discussion for another day, but it's certainly an interesting discussion and it's something that colleagues may want to take up in other committees on that sort of thing. But, Peter, did you—?

Yes, if I could move on, I want to look at public service—a few questions around public service. I want to just touch on the local government settlement. I thank you for your comments yesterday, and I know local government have been quite vocal, as they generally are after the settlement. We know that the 4.3 per cent increase may not be quite where local government felt they needed to be to maintain the issues. However, I'm sure they're grateful for the uplift. However, as I shared on the floor of the Chamber yesterday, and you acknowledged, there are significant variances between the lowest and the highest funded, so whilst the average of 4.3 per cent probably hits your target, especially if you take in, as you said earlier, your in-year spend and things, it clearly leaves some challenges. I think it needs to be acknowledged that the cumulative effect per capita spending over a 10-year period is significant and would show—certainly if I look at Monmouth, for instance, who's lowest of the pot, and if you looked at the cumulative pressures on per capita spending, and the difference between those who are twenty-second and whoever’s twenty-first on the list, you will see that gap growing. That's why there is some serious anxiety. I know we’ve raised this, and the funding formula is a difficult one, and it can be talked to very simplistically, but we know it's very complex. However, there does seem, in many minds, something fundamentally wrong that enables some authorities to manage reasonably well and accrue additional reserves, whilst others struggle to manage and actually have to draw deeper into their reserves, pushing them nearer to the brink where they don't want to be, and we don't want them to be, because we need to see a sustainable local government family as we move forward. Yet there seems to be something wrong in the system now. I'm not saying it always was, but it is making the situation worse.

I did ask you yesterday if there may be consideration of a floor, recognising the differences here, and I know you're going to consider options going forward. I didn't know if you wanted to reflect any further on any of that.

Thank you very much, Peter Fox, for those questions. There are just a few additional strands, I think, that we need to put into that debate. Let's not forget that over and above the revenue support grant, there is over £1 billion of funding that goes to local government in Wales in specific revenue grants, and another £1 billion on top of that that goes to local government in capital grants. I was asked a question earlier that I never managed to get to, which was: what about those responsibilities of local government beyond education and social care, which are the two main drivers of expenditure? Those specific grants are very important for some of those other things that local government does, because it does help local authorities to sustain some of those less-pressing statutory obligations. I don't think we've mentioned at all in the debate in the last few days those additional funding streams that are very important.

I thought I had brought with me, Chair, but I find that I haven’t, a piece of paper that I'd asked for following something I heard Mike Hedges say in the Senedd, which is: the table we publish every year shows the additional money that is going in, it shows the percentage difference, it shows the ranking. What it doesn't show is spend per head. And, actually, if you look at spend per head—. Here we are; Andrew has found it for me on the screen, which I'm not so good at. 

I also have it on my screen. 

It tells not a different story, but it just gives you a different insight into it because some of the local authorities who, in an uplift sense, are at the less advantageous end actually have the highest support per head of population from the formula of any local authority in Wales. And that's because, as we know, local government funding is a combination of the ability of a local authority to raise funds itself because of the nature of its local population, and the need for support through the RSG. And, actually, as I would expect—and I'm very happy to defend—those local authorities that have the least ability to raise money themselves get the best per capita deal out of the formula. So, there is more than one way of looking at that cake, isn't there? The percentage rises are one thing, but, actually, per head spending, it disguises the fact that some authorities are still doing very well on a per head recognition through the formula. 

On Peter's specific point, yes, I'm happy to say again to the committee that I recognise that the 4.3 per cent is an overall average, that the spread this year is a bit wider than it's been in some other years, and I do intend to look between draft and final to see whether there is anything that can be done to assist those councils that find themselves at the bottom end of the distribution. 

Hannah. 

Thank you. Thanks, Chair. Just to pick up on the point—I think the Cabinet Secretary partly answered my question before I had the chance to ask it on the importance of a funding floor. Obviously, the per capita point is important but there are some local authorities that don't fare too well on that side, as well as in the table around the funding formula too. I think we've had these conversations in the Chamber before and I'm not going to touch on the reform of the funding formula in this session today, but I think we all acknowledge that the UK Government budget and then the Welsh Government budget is—. We're in a better position than we have been for a long time but it is a step to that brighter future that we want to see.

So, I just want to pick up, as well as the funding floor, around the point you made about the value of those specific revenue grants as well, and whether in the work you're doing now between the draft and final budget in the settlement that will also be something that we consider in terms of whether there are ways that some of those authorities can be supported through additional grant funding as well.

Chair, thanks to Hannah for that. It allows me to make one general point. The way that I want to go about my responsibilities as finance Minister is this: I see it as my job to do the best I can to maximise the amount of resource that is available to my colleagues, to agree with them the big spending blocks, and then to leave it to them. I don't want to be a finance Minister that seeks to be the health Minister one day, the education Minister the next day and the housing Minister the day after that. 

Well, you've been most of those. [Laughter.] 

You're quite right, I've had my turn at those. But I think the job of the finance Minister is to mobilise the money, to agree the big allocations and then for colleagues who are closer to those topics and in those conversations with partners in local authorities, in the third sector and so on to then decide how they want to use the money that they've got. And so Hannah's point is an important one and I'm quite sure that my colleagues, when they're looking at the specific grants that they still retain—. And it's still our ambition, my ambition, to have more of those grants put into the RSG, and we've done that this year with a whole set of housing grants that are now just there for local authorities in the more flexible part of their budgets. But it is for my colleagues to make those decisions, and I'm not micromanaging the way they do it. 

Thank you for—

I'm conscious we need to come to Hannah, so if you would do one more question. 

Right, yes. I'll do health. 

Right, that's a small element. [Laughter.]

Quite a big one, yes. Are you confident that adequate funding is provided in the draft budget for the NHS to address increasing capacity difficulties, such as the record number of people in Wales on waiting lists?

Chair, I think that is a proper question to ask me, because it's about adequate funding, not about the way in which the Cabinet Secretary for health decides to use the funding that he's got. You see that the cash uplift for health is the largest of any part of the Welsh Government, and particularly that additional investment in capital. On the capital side, I probably am satisfied that the amount of capital available to the health service next year is probably at the top end of what the system can absorb. Because as everybody here—well, Mike and Peter, particularly—will know, it's not just a matter of the money, it's whether you're geared up to be able to use the money. On the capital side, I definitely think that. On the revenue side, the health service will always use more money. There's no ceiling here, where you could say, 'Oh, the health service has now got everything it needs', because there is always more demand and there is always more stuff that the health service can do. I am satisfied that there's adequate funding there to allow the Cabinet Secretary for health to make inroads into those waiting lists and waiting times, and for him to be able to pursue the other priorities he's identified.

I've got one final question, if I can—

Go on. Yes, go on, then.

It's linked to an important part of that—

Of course, yes.

—and that's social care. I know you wanted to do more for social care. Could you describe how you've managed that in this budget round? Does that sit within the additionality to local government, or does it sit within the additionality to health? How do we find it, so that we can see where social care has been favoured or looked at?

It's a combination of allocations we've been able to make this year, as well as next year—and I've tried to say on the floor of the Senedd that we do have to look at the two years together, because there were allocations additionally made to local government for social care purposes last week from the in-year budget. Then, it is the money that goes into the RSG and—. Local authorities don't always get the—. Sometimes, I think they're unfairly criticised on the floor of the Senedd, because, if you look at what local authorities have done, they've increased spending on both education and social care, more than we've been able to as a percentage, more than we've been able to put in the RSG. So, they clearly have been prioritising those two services. But then there are the specific grants that I mentioned as well, and there's over £140 million in specific grants in this budget that will go to social services as well: £52 million for social care reform; £45 million in the social care workforce grant; £26 million to Social Care Wales; £10 million in the social services sustainability grant. When you add all of those up, as well as the in-year additions and the uplift in the health and social care MEG, there's all that extra £140 million in the specific grant side of the budget as well.

Okay. Thank you.

Thank you. Hannah.

Diolch. I think we've all acknowledged here already this morning that this is a better budget than we've had in previous years, but that it remains challenging for public services, but the same can be said—. It remains a challenging time for lots of people as the cost-of-living crisis is still biting. So, can you set how the budget will support households that are impacted disproportionately by that cost-of-living crisis?

Thank you, Chair. There are a series of allocations in the budget, particularly in the social justice part of the Government, which have been able to be increased in order to do the things that we do directly in the lives of those people who are most affected. So, I think I referred yesterday in the Senedd to the £1.5 million extra for the warm hubs programme. There's additional money for the child poverty strategy, for food poverty and fuel poverty. There's £1 million extra for the third sector. There's the very exciting new work we are doing in Swansea in the Cwtch Mawr project. So, there is a series of allocations. I don't think I mentioned the uplift in the discretionary assistance fund. I'm very proud of the discretionary assistance fund in Wales. The UK Government abandoned the social fund—the safety net of the last resort in the social security system. In England, it simply doesn't exist. Here in Wales, the DAF will now be £40 million next year. And, really, when you've run out of every other bit of help that the system can provide, the DAF is where you can go to be able to get some help with very basic things—you know, equipment and things like that. So, the fact that we've been able to add to it again next year, I think, is one of the ways in which we're attending to the points that Hannah made.

Thank you, and I absolutely share that recognition of the value and importance of the discretionary assistance fund, and the support that provides. You mentioned extra support for fuel poverty and things, and I was just wondering if that will help people who perhaps might have been on the—particularly those just right on the cusp who will lose their winter fuel payments, if that is the sort of support that could provide some additional support for those people.

Well, it will for those people who qualify in other ways for the help we now offer through the Fuel Bank Foundation, and the fact that we got it operating in every part of Wales. It isn't an open-access fund; it's essentially for people on prepayment meters and for people who live in rural parts of Wales that are off grid. But, for people in those circumstances, then, yes, the fund is now there and augmented for next year.

I should have mentioned, probably, in answering Hannah's question, that, of course, we have sustained our investment in the single advice fund for next year, and there are very large numbers of pensioners who didn't claim pension credit before who will now have claimed it, because of the changes to the winter fuel allowance. You might think it's not necessarily the best way of driving up take-up, but pension credit was the least well taken up benefit of any benefit in the system here in Wales. Now, we have thousands of people who will be claiming it, and they won't just get the winter fuel allowance as a result, because pension credit is a passport benefit and it opens the door to other parts of the system to get help. So, there will be more people getting that help for that reason, and for people on the margins—just above it, as Hannah said—the Fuel Bank Foundation help will be there for those who qualify in those other ways.

I'm glancing at the Chair because I'm conscious of time, so—

You carry on, yes.

I'll try and ask these questions very quickly, so—

I'll try and answer them quickly too. Sorry.

—if you could just set out how the draft budget supports the reduction of homelessness and those living in temporary overcrowded accommodation.

Two ways, Chair. The extra £21 million in preventative services, so the housing support grant goes up by that. So, it takes us back to an earlier conversation on our efforts to try to stop people from becoming homeless in the first place. The housing support grant goes to £204 million, over £200 million for the first time there. The second way, of course, is to build more homes and have more accommodation available for people who need it. So, there is an increase in the social housing grant of £81 million, from £330 million to £411 million, in the draft budget. As well as making its contribution to the 20,000 low-carbon homes for social rent, it will also provide a boost to the transitional accommodation capital programme. And for a bit of a theme of today, let me say that I think that is a real success story of local government in Wales. I think the way in which our local authorities have used that money to bring forward, not temporary accommodation in the sense of overnight or for the weekend, but decent accommodation that will allow someone to have a stable home while something long term is being organised, I think the imaginative way in which local authorities have found accommodation that they can adapt and use in that way, and new ways of doing things, I think it's been a real a success story, and there's more money for it in this budget.

Carry on.

Thanks. Thanks, Cabinet Secretary. You've seen quite a bit of focus in recent weeks on the increase in national insurance contributions, and that's coupled with an increase in wages, which obviously we would welcome, an increase in people's wages. So, just to touch on how this budget would support those businesses and organisations perhaps most impacted by the national insurance increase, what support from Welsh Government actually mitigates that, and also more broadly, how that feeds in to economic growth.

Well, there is direct help for businesses in the budget. It's not specifically designed to help people who would get help otherwise with the national insurance issue. As I explained yesterday in the Senedd, I'm loathe to use money that comes to Wales for our responsibilities to substitute for responsibilities that are held elsewhere, but the budget does provide, in the non-domestic rates side of our responsibilities, permanent rate relief at £250 million, an extra £78 million to continue the temporary rate relief in leisure, retail and hospitality at 40 per cent, and £7 million to keep the multiplier down to a 1 per cent rise next year. I think those are continuing and very significant responses to assisting businesses with the continuing pressures they face.

We're on the clock now, but I'm just going to squeeze in one final question, if I may. I'm conscious that, actually, you're at this committee more regularly than I am, but I understand that you told the committee in September that you have conversations with your colleagues about the longer term transfer of post-EU funding back to where it belongs, so are you able to update the committee on how that is progressing?

So, Chair, I think, since I was here in September, the agreement was reached with the UK Government that there would be one final year of the SPF—the shared prosperity fund—run by the UK Government, because the expenditures that were expected in the three years of the programme hadn't been completed. So, there's one final year of that. Wales is getting 23.5 per cent of the fund to be spent in this final year. I remain confident that, beyond that, from 2026-27, that funding will return to Wales to be used in the ways that this Senedd would decide, and in line with the approach that we have used before and further developed, particularly with the Organisation for Economic Co-operation and Development, that it would be a partnership approach, bringing local government, universities, the private sector, around the table together in order to make those determinations. 

There's been a bit of excitement about whether a Minister in the House of Lords implied that the future funds coming to Wales would be at the Barnett level rather than at the 23.5 per cent level. There are no final decisions, but what I can say to the committee is there's nothing in the discussions that we are having at official level with the UK Government that suggests that that is how they are going to approach it.

Diolch yn fawr. As has become a little bit of a tradition with your predecessor, I tend to ask a Christmassy question to finish. I'm hoping you're not on the naughty list with Santa, but if you had one wish in relation to this budget this year, to arrive in your stocking from Santa, what would that wish be? 

More money.

Well, well—

Without the obvious. [Laughter.]

I'll try and avoid the absolutely obvious answer. And not to go over stuff we've covered already, I suppose if there was one thing I would have liked to have seen, it would have been a bit more progress on some of those issues that lie beyond the immediate budget, but continue to be matters of discussion between ourselves and our UK colleagues. So, that would include the flexibilities, it would include the long-term reform of the fiscal framework, but then there is that other list of things: the high speed 2 line and how we resolve that; the Crown Estate and where that lies in relation to devolved responsibilities; and I think it's a really difficult issue myself, but Barnett, and how we can move beyond Barnett. So, there are a series of big issues there. I've explained before, and I think it's a genuine explanation, that in the first six months of a Government you can't expect a Government to have grappled with all of those things while they're trying to do the immediate things that are in front of them. But if I had a wish for Santa, it would be that we could accelerate some of our discussions on those wider issues.

And to colleagues as well, it's been a long year, it's been an interesting year, and next year looks to be some more of the same, I'd imagine.