Cynulliad Cenedlaethol Cymru

Thank you, and thanks very much for the invitation to appear before the committee. If I may, I'll take the last point first, because it's the one that has been raised probably more often than not in recent times. In a way, I think it would be wrong for me to ever be content. I think part of my role is to yearn to improve everything that we do by way of communications and the relationship between UK and Welsh Government. I don't think there's ever a day when you can sit back and say, 'We've cracked this. This is as good as it's ever going to get.' I think that would be an incredibly complacent place to get, and I certainly don't want to find myself in that position. 

And so, yes, of course, early on in the COVID crisis, there were quite a lot of references to the daily Downing Street briefing, were they were being precise enough about what was devolved and what wasn't, and every day—and colleagues of yours in the Senedd will back me up on this—every day there was an analysis of where we could make the message clearer and louder so that many people who were worried or felt threatened by what was going on had as much information to hand as possible.

In terms of your initial point about trying to ensure that clear idea and that clear message, it is—. I think we have been—and I would say this, wouldn't I—slightly hampered by media representation of the reality. And I don't mind pointing the finger a little bit, because I think there has been some almost rejoicing in a lack of clarity in some quarters, which hasn't helped those people at the receiving end, and I think that has been a pity. I think that the media, quite rightly, wants to unearth the truth, it quite rightly wants to catch us out if we are incompetent, or if we're being disingenuous. I think that's a slightly different position to adopt than one that is purely looking to create almost an artificial division between Welsh Government and UK Government in their joint fight against COVID.

And the reason I say that is because, in eight out of 10 cases, UK and Welsh Government have actually co-operated and collaborated and operated very effectively as one. I think the expectation of voters has been that that's what we should do, and the expectation of business is that's what we should do. And, in most cases, that is what we have done. The First Minister and I had a conversation—I think it was as recently as last week—when we were re-emphasising the fact that, in most cases, it has been a successful, if tense and occasionally strained, relationship. But, as I say, if you took your measurement only from what was in the public domain, you might reach a different view.

Who is responsible? Well, we're all responsible. I think that, as elected politicians, either in a backbench capacity or in a Government capacity, we're all responsible for putting down the normal—casting aside the usual political hostilities during a crisis like this in an attempt to do what I hope we share as a view of the right thing, which is to make sure that our communities have as much up-to-date, clear information as they can all the time, bearing in mind that this is a very fast-moving set of circumstances and we don't necessarily have all the right answers. So, we're all responsible, from top to bottom of the Senedd and top to bottom of Westminster, in getting this message out in the right form.

So, could you tell us a little bit about any proactive role that you've been playing within Government to make sure that other departments within the UK Government are more mindful of the fact that they need to distinguish, at times, where certain decisions or announcements are ones that are devolved or not?

Yes. It's a fairly constant activity, in fact, either at official level or at ministerial level. My colleague David T.C. Davies and I are—. I'm trying to think of a—. I cannot think of a day, let alone a week, in the last four months where we haven't sat around a table with ministerial colleagues or their officials here in Westminster—and indeed in the 125 meetings that we have had with colleagues of yours in the UK-wide response—in an attempt to make sure that, where there are differences, they are evidence-based and understood, and, where they're not, the information is transmitted as clearly and as promptly as possible. And, again, it has been a frustration—and you know this, because you've heard me, probably, say it a few times before, in front of other committees—there has been a frustration that the—. Since day 1 of this crisis, there has been a steady, regular, collaborative and positive liaison between Ministers in Welsh Government, Ministers in UK Government, officials in both institutions, which has been, as I say, at the last count, which was, I think, on Wednesday last week, about 125 such occasions. I think that shows very good faith, on the part of both Governments, that we entered into those meetings with a common goal, which was to get ahead of COVID as best we can and to communicate our progress or our obstacles to the wider public, and I think it's a pity when it has been suggested that somehow that has either been insufficient or, in some cases, non-existent. It is simply not the case.

Okay, thank you. Alun Davies.

Thank you very much, and thank you very much for that, Secretary of State. I don't disagree with your fundamental point. My experience of Government here in Wales is that 70, 80 per cent of the time we do largely agree with our counterparts in Westminster, and sometimes on some quite surprising grounds, where people would anticipate more, perhaps, drama. But—and it is a 'but'—I found, as a Minister, that relationships both between individual Ministers and between institutions, and policy, were better served by face-to-face meetings—you know, in different circumstances—and sitting round the table with my counterparts in the United Kingdom Government, who were largely representing England and English needs, and then the Scottish Government and Northern Irish Executive. I felt that, if we were able to sit around a table and have sometimes quite tough conversations, some robust conversations, we largely reached a common place.

And this is where perhaps I'm inviting, Secretary of State, you to put yourself in the role of a turkey voting for Christmas—I didn't find the Wales Office to be a part of that, if I'm quite honest with you. I found, when, for example, we were discussing budgetary issues with the European Union, we would talk directly to Foreign Office Ministers and directly to Treasury Ministers, and it worked very well. Agriculture, we'd speak as agriculture Ministers; environment as environment Ministers. My last meeting with the UK Government was on veterans' issues, and I sat next to Gavin Williamson as Secretary of State for Defence and opposite Ministers of State in housing and education, and they had a good conversation, and we achieved the objectives of the meeting.

So, is it time that we moved beyond the role that has evolved, and that we established proper inter-governmental structures, rather than the somewhat ad hoc situation that still occurs? 

Well, there's a few interesting points that you've raised there, and I absolutely share your view that, where possible, face-to-face meetings are better even than Zoom, although Zoom has fulfilled an essential function during COVID, but I suspect that we all have probably recently discovered that when you actually get back in the room with people, even taking into account the required regulations, it's a very different sort of meetings than the ones that we've become used to having on these means. So, on that score, I absolutely agree with you and I think there are elements of collaboration that can only be achieved via those rather old-fashioned and traditional means.  

As far as your principal point there about inter-governmental relations, I suspect that in all of this, what COVID has done has shone a light on the things that work as well as the things that don't work. Barely a day goes by when we don't read some newspaper report or other around where there might be some disagreement over a significant issue, and I might as well raise the word because I'm sure somebody else will before too long—the most obvious example, actually, probably isn't COVID, it's Brexit, where you've got a very different policy position. Even though the popular vote was in favour of leaving the European Union in Wales, I accept that the Welsh Government's position is to pursue, or would have been to pursue a slightly different route, perhaps, than the one that the UK Government has taken. 

Now, in that instance, UK Government has to take into account, first and foremost, the views of voters, but also as far as possible reach something resembling an agreement on the key matters with Welsh Government. That has always been the case, it remains the case, but at the end of the day a decision has to be taken, and somebody has to take it. So, I don't think you can ever get away from the fact that, in the end, trying to reach consensus on some of the really prickly issues is probably—. There isn't a mechanism that can guarantee that, and we have to rely on the fact that we can only take it so far. 

I understand the point that you make, and the buck clearly has to stop somewhere; I accept that. But all too often, I sense that we don't have the structures that the United Kingdom needs to take decisions. Gordon Brown, for example, made a poor decision over Olympics spending and said it was UK spending, so therefore there was no consequential. And then David Cameron, I think it was, took an equally wrong decision over HS2. In both cases, Labour and Conservatives—it's not a party point—the appeal was to the department that had taken the decision within our current structures. Now, that clearly doesn't work and it's never going to work. I think we do need to have more UK structures, potentially, that aren't necessarily the structures that exist within the United Kingdom Government itself.

We could spend an afternoon or a week on this; I won't pursue this, Chair, too much further this afternoon. But I think the Secretary of State may wish to reflect on some of these issues, because they're intended to help the UK work more effectively rather than to stop the UK working at all, and I get a sense that if a Government in the UK imposes decisions on a regular basis, or it becomes a regular basis, then the nature of the union will become more difficult to support and sustain. So, I think we do need to find ways forward. 

But if I could move on—

Yes, sure. I'll come back to you on that, if I may. 

Yes. Last week, I think it was your department that issued a press statement saying that there was a £500 million consequential following the Chancellor's statement in the House of Commons last week. The advice that we've had from Welsh Government is last week the consequentials were actually £12.5 million and not £500 million. The balance comes from previously announced decisions. Is that your understanding of the situation, Secretary of State?

No, and I'll explain why in a minute. I do just want to come back to your earlier point about the union as well. Not only do I think that it's wrong, but I also don't understand the manner in which the claim is being made, given that it doesn't seem to be disputing that there is £500 million—or, in fact, in total, £2.8 billion-worth of Barnett consequential funding, just since the COVID outbreak started. And I haven't had any representations from the First Minister or immediate colleagues to the effect that that is disputed, by the way. So, my point is that it is not clear from the counter-claim, I think made by Rebecca Evans last week, that whether she was just counting last week's announcement or trying to back calculate previous announcements, to say, 'Well, they've already been announced, and the money's already been spent, and therefore it doesn't count'—. The fact is that £2.8 billion, of which £500 million was a part, has been, or is in the process of being made available to Welsh Government as a result of the Barnett formula. As far as I could tell, but it was very unclear, that wasn't what was being disputed. And I think to somehow manage to redefine a £500 million Barnett consequential, which the Treasury, and indeed UK Government, absolutely stand by, to £21 million, or whatever the figure was, has dumbfounded cleverer economists than me. And I suspect one of the reasons it hasn't had much press coverage is because I don't think the press are particularly convinced by it either.

So, we think that the £2.8 billion figure stands, and we think the £500 million element of that stands. There may be some—[Inaudible.]—within that, hence why, I think two weeks or three weeks ago, I was asked to sign off on a sort of advanced payment of the initial Barnett sum, which was in the region of £850 million. Welsh Government asked us to make that available about six weeks, I think, before it would normally have been made available under the usual terms and conditions. So, I am mystified. I'm also a bit surprised that this was given—as I say, when we're trying, as two Governments working together, to do everything within the realms of possibility to help businesses and jobs in some really difficult situations, it would seem to me to be an odd argument to pick, particularly when it's not one that appears to be shared throughout the ranks of Welsh Government. But that's a slightly different observation.

Just one other point I was going to quickly mention, because you raised it earlier, was about the structures. I wondered if within that question you were hinting at a reform of the Barnett formula—I don't know. You may tell me I was wrong—I sort of hope you—[Inaudible.] But I do agree, by the way—or I would suggest rather than agree—that one of the really important lessons of COVID is that it doesn't respect political boundaries, and nor do many of the businesses that we are now trying to support in one way or another—they do not respect political boundaries either. That has raised, again, the question of the value of the union, which is a view that is disputed in Scotland, and disputed in one or two corners of the Senedd, but not by Welsh Government. I think what it has done is highlighted the fact that the union is called that for a reason, and that economic interventions, long-term infrastructure projects, long-term strategic exploration of some of the businesses that keep our communities going, are very union-focused, and need to be very union-focused. And I think COVID has reminded us why they need to be union-focused.

Okay, Secretary of State, I know time is going on so I won't claim the Chair's tolerance much longer. Can I say, I've never believed that Barnett's fit for purpose, frankly—I've never known it to be fit for purpose. And I've always been a bit mystified why Ministers in the UK Government, from any party, continue to rely on it. It's very easy, I accept that. That's probably the best thing going for it, but it doesn't reflect need and it doesn't reflect the requirements of a community. And if a union is to mean anything, and you and I both believe it does, it has to mean more than simply an economic argument. Because if it is only an economic argument, then that's a pretty wretched place to find yourself 500 years later. So, I hope that it means a little bit more than that. But if it does mean that economic relationship, then that economic relationship has to be based on need and not just numbers. And I think the fundamental weakness of Barnett has been demonstrated, actually, within this crisis, and the need for reform I think has been emphasised through this crisis.

But going back to the £500 million package of consequentials, which were or weren't announced last week, and I've got no argument with the overall number that's been announced, by the way, from the United Kingdom Government—I recognise that and I've got no issue with it. Where I have an issue is how these numbers are communicated, because I felt that—I think it was you, but certainly UK Ministers, were very clear on Wednesday, speaking after the statement, that this is a £500 million package for Wales. And that is deeply misleading, because the package, on Wednesday, wasn't a £500 million package for Wales, in the way that you've just described. A number of different elements of it, over a period of time, would add up to £500 million. Different elements would add up to £400 million and different elements again would add up to £800 million. But the numbers themselves weren't there to sustain that on Wednesday. In terms of public understanding, would it not be better if UK Ministers could clarify and make clear that 'This is a package for GB', 'This is a package for the United Kingdom as a whole', 'This is a package for England', or to enable us, as Parliamentarians, to understand what is being said and, then, the general public to understand where money is being spent. Because I did feel that last week there was an element of playing a game there, which I felt undermined the objectives, which I agree with and which you set out in answer to our Chair's opening questions. 

It goes back to your communication point, really. We felt that the accompanying explanation and commentary, which listed the manner in which that £500 million had been calculated, was quite clear. In fact, I would argue that it's been a lot clearer and a lot prompter than previous public spending commitments that have been subject to Barnett. So, we thought it came out in a timely fashion, nice and clear, with tabulated comms to go with it, and all part of the £2.8 billion package, to use your expression, which has, so far, been committed to Wales. 

Of course, the 'being spent' bit is a matter for Welsh Government, as we know. In making public a £500 million Barnett consequential, I can't set out what Welsh Government is going to spend it on, because that's not for me to do so. So, I would play the ball back down the pitch a little bit and say that it would be very helpful, I suspect, in your and my shared ambition for greater understanding of the public, for Welsh Government to make it absolutely clear where the £2.8 billion that it has so far received from the UK Government is being spent or where it is intended to be spent. Because, as we know, there are Barnett consequentials in a number of subjects that are not necessarily even relevant in Wales but nonetheless result in a Barnett consequential. 

So, I hope that is, as I say, a shared ambition. We shouldn't forget in that, of course, and we tried to make this as clear as we could last week, the £2.8 billion is only that which has been received as a consequence of Barnett. There is another sum of money, which is probably coming out later this week, actually, in terms of the analysis, around furlough and business interruption loans and other UK Government interventions, which, at the last count, probably doubled that £2.8 billion figure, and reminds us that one in three of the workforce in Wales is currently on a furlough scheme. And so we, in making these announcements, and I would like to think that members of this committee recognise that Rishi Sunak's intention in these big set-piece announcements like he made last week isn't to be especially political, but is to actually be clear and helpful and concise, of course in the context of the union. And I think the union argument, that is one which is worth airing in the current circumstances, not, as I say, to make a cheap jibe at some of our colleagues who may take a different view, but simply to point out what the reality is in these circumstances, which, as I say, four months ago, none of us were really aware were even around the corner.

Thank you, Secretary of State. Right, I've had indications from Rhianon, Siân and Nick that you each want to follow up. So, I'll ask you, please, to be brief so that we can make progress. So, Rhianon first of all. You need to unmute yourself. There we are.

Thank you, Chair, for that. I will be brief and I think the points have been covered by Alun Davies in regard to the inter-governmental mechanisms that are needed in order to be able to have a position of trust between the UK Government and Welsh Government. And I think it's not helpful then when you do have in a single statement, as has been of this week, of a £500 million consequential. I don't want to labour the point, but there is a £12.5 million direct consequential from that single statement, and that has been articulated from Welsh Government and can be disseminated much more clearly for you. I won't have time to do that now, but I could if I wanted to.

And it is also quite clear that of the £2.8 billion now that you talk about—which we have down for £2.4 billion—that the actual Barnett formula consequential for that is £1.9 billion. I think at the heart of this is the communication issue, in terms of how we move forward, both for COVID and also in terms of Brexit. And I think if we want to have that clarity, it is really important for Wales that we don’t have media announcements and policy flowing through from that; it has to be the other way round. And I think that communication is absolutely critical if you don't want these types of conversations moving forward, because there is a lack of clarity and there is an ambiguity around some of these figures. I think, in a sense, that has to be dealt with in terms of an inter-governmental mechanism, not just at the Wales Office, from which there has been clarity in terms of conversation majoritively, but higher up in terms of ministerial level conversations with UK Government.

We don't always get advance notice of allocations that the UK Government intends to make and any subsequent consequential funding that might flow to Wales. We all need that conversation to take place, so that there is no misunderstanding or ambiguity, and that's being kind. Thank you, Chair.

Thank you. Secretary of State.

Thank you. I think there's a question around 'What's the purpose of devolution?' lurking in there in some ways. We don't expect or require—nor could we—Welsh Government to give us advance notice of policy announcements and decisions that it's going to make, even ones with a fiscal consequence. And so, again, I have been a bit mystified that apparently the opposite should be the case, and I sort of slightly feel that we either have devolution or we don't. We try to respect the devolution settlement, and that puts an onus or responsibility on Welsh Government to make its decisions on the basis of its funding capacity and its policy position, which is fine. We might not agree with it, but we nonetheless respect that under the settlement that's how it is.

There is a reason, in some cases, why Welsh Government isn't in every room at every time a decision with a fiscal consequence is made, any more than I am, which is where there are market sensitivities—as there were with a number of last week's announcements—that kind of information, quite rightly, has a very limited audience.

But my point is that, from the point of view of public confidence, we absolutely stand by every single figure that the Chancellor published last week. That was done absolutely in good faith and, frankly, there is no political gain from saying £500 million if the figure's £400 million or £300 million. That figure is calculated in good faith because, as I say, the consequences of trying to be disingenuous about it are quite significant, so there's nothing in it for us if we want to try and make this opaque, vague and rather smoke and mirrors. So, we absolutely stand by those figures, and whether it's £1.9 billion or £2.8 billion—we think it's £2.8 billion; Rhianon says £1.9 billion—the fact it, it's still a very substantial amount of UK tax payers' money being deployed to help people and businesses in Wales get through this awful crisis. And there is a fine line—I accept it entirely—there's a fine line between having a robust public dispute and debate about a quantum in order to be accountable and one which is designed just to look political, and I think that we all need to be very wary of the fact that some of these disputes look—can look, not saying on this occasion—contrived, and can actually really switch off the very people that we're trying to engage.

So, what does it say about the current arrangements and relations that we can actually have two Governments with such differing views of what the settlement is? There's party politics, maybe, as you maybe suggested, but surely the system should be robust enough to make sure that actually there is clarity there because clearly there isn't at the moment.

Well, I think there is clarity. I'm not worried about the clarity situation; it appears that others are. I think the situation was made extremely clear last week, and in all of the other ways in which interventions have been made by UK Government in a way that impacts on Wales, and as I said, there are going to be further figures published this week around furlough schemes and how that breaks down by country and by region, in fact. So, as I say, I don't recognise this lack of clarity and in all the business round-tables that I've been conducting, which, as I say, don't recognise these political boundaries, they are actually just looking for outcomes, just looking to see what's out there that can save their businesses and save the jobs associated with them. That's the discussion that I'm having. Nobody—literally nobody, nobody—other than other politicians are saying to me, 'Is it £1.9 billion or £2.8 billion?' Nobody. When I talk to big, small, medium businesses, north, mid, south, west Wales, they're interested in what we are doing to help their businesses and to help COVID recovery, not, as I say, who's winning the political point-scoring competition between Westminster and Cardiff.

Okay. Siân Gwenllian.

Thank you very much. By the way, from a point of just presentation, I like to think of UK Gov and Welsh Gov as our Government: it's not your Government or my Government, it's our Government, it's a Government of the UK and a Government of Wales based in Cardiff. So, as far as I'm aware, it's always about ours, not theirs or his or hers or whatever. Anyway, it's a small point. 

As far as the M4 relief road is concerned, this was raised last week, actually by the Prime Minister in response to a question from Liz Saville-Roberts, and it was an opportunity to remind anybody who's interested that were there to be a different administration in Cardiff, then we would proceed with the M4 relief road, which we consider to be an important part of the economic revival of the whole of that corridor, probably enhanced by the effects of COVID, so an even greater need to open up all of the potential economic avenues that we can. So, the PM, in answering that question, rather than interfering with the decision-making process of Welsh Government, which he and I completely recognise rests with the Welsh Government, we simply remind anybody listening that we would do it differently and that our offer to Welsh Government, as far as the funding formula goes, remains. And we were simply—and maybe cheekily—reminding listeners that this was, after all, a Labour manifesto commitment, rather than purely a Conservative one, so there's been universal—well, I don't want to say universal; that's probably putting it too strongly—but I think quite widespread agreement that the Brynglas tunnels are an impediment to a number of businesses up and down the M4, and—

But you're contradicting yourself completely here, because you're saying on the one hand that it's up to the Welsh Government—be it a Conservative-led Government or a Labour-led Government—to make decisions, and yet the decision, the announcement, was made by your Government in Westminster, so I will leave it at that.

It wasn't an announcement; it was a response to a question, and the Prime Minister simply made it clear, reminded us all, of what our position is. We know we're not in Government in Cardiff, and we know what the arrangements are as far as devolution, but the PM was making it clear—

I'm not sure that you do actually understand what the arrangements of devolution are, but there we go.

With great respect, what I do understand—I would like to think I understand a little bit about it—but what I do understand also is the economic need of the area. As I spend quite a lot of time on Friday up and down that bit of the M4, it is hard to meet anybody who doesn't fear for their business and therefore their ability to create and sustain jobs, in a very difficult climate, that is not impeded by the fact that this, the most important arterial route—some would argue in the UK, let alone in Wales—is currently a hindrance to progress. And we were simply reminding, as we will continue to do, of the fact that not only if we were in office in Cardiff would we change that, but the UK Government remains committed to making the borrowing facilities available to Welsh Government should it change its mind any time soon.

Thank you. And the definition of progress, of course, and the terms of that debate might have changed somewhat in Wales given the Well-being of Future Generations (Wales) Act 2015, but as Siân said, we're not going to go there now. I'll move on to Nick Ramsay because we do need to make progress. Nick.

Thanks, Chair. Can I just ask two quick questions, or two quick points on two of the issues raised already, actually? First of all, on the issue of the M4, I just listened to what you had to say. Can you just clarify and put on the record, Secretary of State, that when it comes to the Government's agreement to provide I think it was enhanced borrowing powers for the Senedd, for the Welsh Government, to provide that solution to the M4, that that is still on the table? Because I think there have been some questions, with the amount of borrowing that is happening, about whether some major infrastructure projects would be scrapped. I'm not one of those who sees the UK Government as trying to insist on this; I think you do recognise that the Welsh Government has the power to do this, but you were previously willing to provide that borrowing capacity, so are you still prepared to do that?

And secondly, on the earlier point of this £500 million that's being bandied around, am I right in thinking that a similar discussion—argument—happened in Scotland shortly after the statement, and that the Scottish Government's accusations that they weren't receiving anything like what was suggested actually were quite roundly dismissed? And is there some way in future that a better mechanism can be developed, so that if the UK Government believes that they are giving the Welsh Government a certain portion of money, and the Welsh Government don't believe that they're receiving that, that there can be some kind of agreement in advance, so that this sort of discussion, which really does, as much as the public are listening, does confuse them, can be avoided in future?

Thank you. As far as enhanced borrowing powers are concerned, I think it is absolutely fair to say that all of the infrastructure comments we've been making over the last few months, particularly around—you've heard the expressions a thousand times before—strengthening the union, levelling up, all still apply, and if anything probably apply with greater emphasis than they did before COVID, because the requirement for urgent economic revival is now, as I say, more vivid than it ever was when we were having those discussions back along. And it raises an interesting question around Barnett, actually, going back to one of the earlier questions, because, of course, one of the criticisms of Barnett is that if there is something resembling a major infrastructure scheme, there is seldom the funding available to undertake it if we rely purely on Barnett as a source of funding for that. So, there is an argument, there is a discussion to be had around how big infrastructure projects are funded, and, back in 2016, I think it was, when this was a Labour Party manifesto commitment, that's when these discussion were first being had, because of course it was how—. This is a scheme that probably couldn't proceed just within the normal boundaries set by Barnett consequentials on infrastructure improvement at that particular time, so I think there is a discussion to be had there.

On the £500 million versus £21 million, or whatever the debate is, yes, it was quite obvious that within a few moments of Scottish colleagues raising a question about the validity of the, I think, £800 million Barnett consequential that they were receiving from last week's announcement, an almost identical claim was made of an almost identical sum by colleagues in Cardiff. Now, the Scottish claim was roundly dismissed by experts north of the border, and therefore we have no reason to believe that the similar claim made in Wales could be equally roundly dismissed. However, I do take your point about whether there is a way in which we can sort of almost agree these numbers in advance so there is no disagreement around it. Such is the, as I say, market sensitivity around some of these, I think it would be very, very difficult to persuade, and would be very difficult to argue that it was right to have a situation where all of these numbers were discussed in great detail around wide tables in advance of an announcement because, with great respect, it wouldn't remain very discreet for very long, and particularly where there might be some political runs to be scored. I fear that the idea of that lovely, perfect world that you have presented, which I would almost love to live in myself, where all of this would be done in a nice civilised, trustworthy fashion and nobody would ever breach the confidences that would be required, I don't think we're quite there yet, but, you know, maybe—you never know.

You never know, you never know. Okay, I'm mindful of—

I think Gethin was going to say something, sorry.

I wouldn't want the committee to leave this session thinking that Wales isn't going to get £2.8 billion in additional funding relating to COVID. It will, and it will this year, and it will be able to spend it this year.

There we are, okay. That's clear enough, I think. Mike, a very brief interjection and then we'll skip on to Rhianon if we may, Nick, if that's ok, because we're running out of time. 

Very briefly, you print the tables—why don't you print the calculations behind the tables, then this argument would not be taking place?

That's a good question for the Treasury; it's a perfectly good one, but I don't know the answer to it. 

Well, the answer is the Treasury will be fine-tuning the small print, as it were, the small numbers, right up to the supplementary estimate, which are made towards to the of the year, so they're very reluctant to give an early print, if you will, that may be subject to minor changes later.

But they were quite happy to announce the £500 million. They must have had calculations to produce that. Why can't they show the calculations to produce that?

They're calculated against the Barnett formula. So, you know what I mean, there can be no suggestion Wales has been short-changed in any fashion here. They are Barnett consequentials, and they are Barnett consequentials in the way that Wales has received Barnett consequentials for the last 41 years.

I don't disagree with any of that. All I'm asking is can you show the workings. It doesn't seem a very complicated question. It's okay—I can't get the Welsh Government to do it either over the local government settlement. But, really, why can't Government produce the working? If they come up these numbers, there must be some calculations somewhere that produced them. Show your working. 

We'll take it away. The calculations are done in the Treasury. We will ask Treasury whether the calculations, the sub-divisions, can be shared with the committee. It is worth saying that, of course, it's unhypothecated, so the Welsh Government can spend that £2.8 billion as it likes.

And any information will be received on that basis, of course. We fully understand that. Thank you, Mike. Rhianon.

Thank you. I'm not going to labour the £500 million but it is on allocations already announced, and I think it's that ambiguity that's the problem, and I totally agree with Mike Hedges in his last point; it is about building that trust and building those future mechanisms. 

So, moving on to my line of questioning further to that, then, how well do you think that the Barnett formula—and you've already touched upon this to a certain extent—has worked for Wales during the pandemic? And has an assessment been made as to whether additional COVID funding provided across the UK nations is distributed relative to the likely impact of C-19 on all of the Welsh indices of multiple deprivation, factors that we know impact on the prevalence of COVID-19 in the different nations across the UK—so, what needs-based assessment?

I think there are two elements to the funding. There's the Barnett funding of £2.8 billion, and then there's the intervention funding around business interruption loans, furlough and related activity amounting to, for the sake of argument, £5.5 billion and rising. So, there are two really important elements to the funding: one is direct, one is indirect. Barnett is indirect.

To answer your question more precisely, we have, to date, had 125 meetings with Welsh Government in relation to the particular problems facing Wales in relation to the reaction to COVID. The spending of that money is a matter for Welsh Government; it is not a matter for UK Government under the current arrangements. And so, in terms of prioritisation, where it goes, whether it's being spent wisely, I assume you will have Welsh Government Ministers in front of you to answer those questions.

With respect, that's misinterpreting my question. My question is, through the Chair, from the front, what assessment of the devolved nations' needs has there been in terms of your allocation of funding? And that's obviously within Barnett and externally to that.

There's no direct assessment of need within the Barnett formula. However, the Welsh Government does have the fiscal framework. There is a guarantee that Welsh funding won't fall below 115 per cent of equivalent funding in England. There is a parachuting down of 5 per cent until we get to that formula. So, there is an element of need in the overall funding framework for the Welsh Government. There is no element of need in the specific Barnett consequentials that it's received. 

So, externally to the Barnett formula, in regard to Wales's needs, what you're saying is that there's been no assessment from the UK Government as to a needs-based mechanism of allocation of funding across the devolved nations.

If you're asking are we moving to a needs-based formula and leaving Barnett, then the answer is there are no plans for that at present.

No, that's not what I'm asking. What I'm stating and asking you is: what assessment, across the devolved nations, has there been in regard to your allocation of COVID funding, both within Barnett, which you've answered, and externally to that?

Well, as you say, there's no element of need in Barnett. There is UK-wide funding in reserved areas on schemes such as furlough, such as the self-employed income support scheme, and, of course, they're demand led, and as such there's an element of need there.

Fine. Rhianon, can we move on to Siân?

There is a process, and those conversations are happening, and COVID has shone a light on some of the arguments that have been made in relation to the quantum in particular. It will be a matter for Treasury to apply it, in the fullness of time, but those conversations are ongoing at the moment. I don't think anybody started with any particular agenda, so we'll see where they lead. 

Sorry, again—say that again.

Well, I can tell by your smile that you're hopefully not expecting me to fall into the trap that you've just set. I am not going to prejudge the outcome of the discussions between Treasury and Welsh Government on that; I think it would be entirely wrong, because that, in itself, would become an unnecessary distraction. Apologies for such a standard answer.

That's not absolutely correct. The movement you have in the direction of what you want as a committee, as far as I can read it, is that there are discussions going on between Treasury and Welsh Government. That's a significant shift from where we might've been a year ago. So, I wouldn't look at it quite so negatively. But, let's see where it ends up.

Okay. But we as a committee have expressed an opinion on this, and I'm just expressing the opinion of the whole committee that we would like for you to convey that strong view that's coming through from Wales that we would like to see those limits extended.

These are matters for HM Treasury to decide on. There's obviously a spending review coming up and Treasury will be looking at fiscal mechanisms and at funding totals in the context of that spending review. So, Welsh Government should be lobbying Treasury for any changes they want to see.

And I think those discussions are taking place. I think that's part of the overall agenda, by the way. So, it's not off the page.

So, Welsh Government needs to lobby the Treasury. Can the Secretary of State for Wales be lobbying the Treasury for the changes that Welsh Government would like to see?

If Welsh Government make an irresistible case that benefits not Welsh Government but business and residents in Wales, then I would be happy to look at it. But they haven't, at this stage, sought to engage me in that process. That might tell you something.

There we are. Okay, thank you. We will need to move on, then, and I'll move to Mike Hedges.

Diolch, Cadeirydd. The first question is—. You've got a situation where local authorities in Wales can borrow prudentially and the Welsh Government can't. I mean, don't you think that that's an anomaly? The second question is: why does it matter to the Government or the Treasury, if they allocate money to Wales, whether it's used for capital or revenue?

I honestly think that's a question for Treasury Ministers and Treasury officials. I will just point out one thing in case it's escaped notice: we're talking about two types of limits here. One is the statutory limit that's in the Government of Wales Act 2006, so there are obviously limits to capital and revenue borrowing by the Welsh Government and annual limits to that. That's statutory and that's in the Government of Wales Act, and, obviously, changing that would require primary legislation. There are also limits to the amount that the Welsh Government can draw down from its reserves, and they are in the fiscal framework. Obviously, the fiscal framework is not statutory.

Sorry, I didn't make myself clear. The first point I was making, which I don't expect you to have a good answer to, is that local authorities in Wales and England and Scotland can borrow money at a level that the Welsh Government can't borrow, prudentially, within their ability to pay it back.

But the other point, which I think is one you can have a view on, is, on the amount of money that Wales gets given, why it should be split between capital and revenue. Why can't it just be given to Wales and let them decide how they want to spend it?

Just on the first point about borrowing, I don't think the committee is necessarily suggesting this, but this is not set in stone, and the fact that there are ongoing discussions at the moment between Welsh Government officials and UK Gov officials is a demonstration of that. And also, if we look back over the lifetime of devolution in Wales, there have been numerous commitments to, and, some would argue, improvements to, changes to, the modus operandi, and that's how it should be. It's not meant to be set in stone; it's meant to be an evolving relationship. And so, I don't think there is any resistance at UK Government's end of this discussion, to simply resist for resisting's sake, but if there is a sound economic argument made that is in the taxpayers' interests and in the interests of businesses and individuals in Wales we're never going to dismiss that out of hand. And so, if the argument around capital expenditure is one such submission, then we're not resistant to having that discussion.

But members of the committee will understand that the Treasury's responsibility is a sort of fiscal probity, and it's not going to be knocked off course, as it showed during COVID. It's not going to be knocked off course hurriedly. It will listen to sound arguments made, as I say, with an evidential backing, and nothing's changed in that regard.

Thank you, Mike. Okay, we move on to Nick, then.

Diolch, Chair. Secretary of State, as a committee we've done a fair bit of work on the Welsh Government's budget process and how practices can be improved and how international best practice arrangements can be implemented. Often when we raise these issues with the Welsh Government, they say that one of their main problems, or one of their issues, is instability when it comes to changing budget dates at UK level. What's your vision for providing or helping the Welsh Government get some budgetary certainty, and the other devolved nations, indeed, in the future, and particularly now, as we come out of the COVID pandemic, it's going to be more important than ever that budgets are aligned and that there are policies in place to improve the economy? So, is there anything that you can do in your role to try and get a little bit more stability in terms of budget dates between the Welsh Government and the UK Government?

I do understand the stability point and, of course, it's as much of an upheaval for UK Gov to have instabilities as it is Welsh Gov, and none of the instability that has been witnessed recently is as a result of anything other than circumstances beyond our control and ones that we are constantly wrestling to manage. So, the quicker we can get back to UK-wide budgetary stability, even if it's just on the actual data that the Chancellor stands up in the house and delivers as a budget or a comprehensive spending review, it is absolutely the same desirable outcome here, as I know you in the committee want, that Welsh Government wants. And it does make sense and we can't put a timescale on it, obviously, because we don't know how long the COVID tail is going to be. But we are very conscious of the uncertainty that that can sometimes cause.

You could've accused me there of living in the perfect world again, but you withheld from the temptation. Just moving on to the green economy, and I think there's widespread—. Well, there's agreement within Wales and the UK Government about the need, when we come out of this, or a desire for us to have a greener, more sustainable economy. What role do you see the UK Government taking in terms of providing certainty, in terms of the long term—taxation of polluters, that sort of policy? And what do you see as the UK Government's role in support for anchor industry in Wales, such as automotive, steel and aerospace?

Hang on—I'm just writing that down so I don't forget too much.

Sorry, I merged two questions into one there.

Six I made it, I think. [Laughter.] One example I think I can give that indicates, to use the expression, 'direction of travel', is the recent package agreed with Celsa in Cardiff and which, amongst the reams of terms and conditions, was sustainable, green steel manufacture in Wales and the rest of the UK. And I think that was a very clear signal as to where UK Gov sees one of the features of the economic revival. Of course, it was talked about a lot in the run-up to the election and, unsurprisingly, took a fairly central part of the current Government's thinking, and even more so now. What we're witnessing, I think, is an economy that we're seeking to rebuild as fast and as robustly and as safely as we can, but not necessarily in identical form to the one that has been so damaged by COVID. If what COVID has done is provide that opportunity or necessity to build a new economy that has got a more urgent focus on the green recovery—whatever expression you give it—then that may be a sort of hidden benefit rising out of this awful time that everybody has been subject to. And so, I think, whether it's renewables, whether it's marine renewables, whether it's the way in which we manufacture steel, whether it's gigafactories, whether it's elements of the automotive industry and of transition away from petrol and diesel to fully electric in a tighter timescale than was originally planned, all of those are indications of where the economy is going and how we hope we can create many thousands of jobs in that particular renewed and rather different and refreshed world.

As far as automotive—. Well, we've touched on automotive, but you touched on Airbus as well. Airbus is a good example of where the UK Government contribution to the industry, let alone the company, is, by anybody's estimation, between £6 billion and £10 billion. It shows that we are committed to that particular industry, notwithstanding the horrors that it's facing in and around Broughton and the supply chain. Discussions are ongoing, by the way, about how we can continue to mitigate the hardship that that particular company is looking at, and also bearing in mind that it's very difficult to second guess where the airline industry is going to be in one year, five years or 10 years, other than that we and Airbus are committed to ensuring that there is an airline industry employing thousands of people in Wales over that timescale. Now, the green element of that is more complex, but it's actually very central to Airbus's thinking. People think, just because it's an aircraft manufacturer, that it doesn't have a green conscience. Quite the opposite. Quite the opposite. Their research and development and technology is very much green facing, and I think we should respect and honour the work they've put into that.

So, it's going to be different, but I think the underlying objective, which is to emerge from this with a greener, more sustainable economy, is undiminished. If anything, it's enhanced.

Well, there we are—

Can I just come back very briefly on that?

Very, very briefly then, because we are running out—

It was just we often ask the Welsh Government about—you've got the pandemic on the one hand, and, obviously, you've got the Brexit transition—capacity and how they balance that. Do you detect—? They say they're balancing it fine. Do you detect the same thing in Westminster, as well—that they're able to balance these two and move forward with the economy of the future?

The prism through which I look is, hopefully, an optimistic and versatile one. For me, even if you combine what we've just been talking about—the effects of COVID and the opportunities presented by Brexit—disputed though some people may find them, the fact is that there is a really good opportunity for job creation and sustainability around renewables and the green agenda, which we were all aware of before, and we were all looking at the timescales and arguing about whether it should be over a 10-, 15-, 20- or 30-year horizon. Actually, we're now realising we can accelerate and need to accelerate that process, and I find little dispute at this end of the corridor around that.

Thank you, Nick. The UK shared prosperity fund, of course, will play a part, I'd imagine, in unlocking some of the potential that we talked about in terms of a green recovery. Are you in a position to give us an idea of when we're likely to hear—?

Still not,  still not—other than that the commitments remain in terms of quantum. Of course, it has probably been complicated by the fact we're now into this COVID recovery period, and you're right—the shared prosperity fund is going to play an even more relevant role in that when the i's are dotted and the t's are crossed. But, as I say, I've said on many occasions, even before COVID, that I'm not—. I think that the future relationship between the UK and Welsh Governments, and its efforts to determine the prioritisation—the way that the £660 million is prioritised—touching on an earlier question about a needs-based formula, is exciting. I don't think this is anything we should feel somehow threatened by. For the first time in 40-plus years, politicians elected in Wales by Wales are going to be making decisions on this funding for Wales, and I would like to think that even some of our Plaid Cymru colleagues might be pleased, in fact, that, for the first time ever, MPs in Westminster are going to be able to vote directly on these matters, having really not been able to do so in recent history. So, this is a big step forward for democracy, and actually I look forward to hammering out an arrangement with Jeremy Miles and others in Welsh Government about how we can prioritise jobs and livelihoods in the places that really need them, and in a timely fashion. So, I'm looking forward to that.

And we very much look forward to inviting you back to discuss it further at a future date. So, thank you very much, Secretary of State, and your deputy director. Can I thank you both for joining us this afternoon?

The committee will now go back into private session so that we can discuss the matters that we've been listening to. Diolch yn fawr.

Thank you very much.