Cynulliad Cenedlaethol Cymru

Yes, thank you, Chair, and good morning. I'm happy to note the papers, but I specifically wanted to comment on paper to note 4, which is a letter from third sector providers of supported living across Wales to the Cabinet Secretary who is with us here today, specifically on national insurance pressures on third sector supported living providers. Clearly, papers are just to note, but I just want to comment on this paper specifically, and wonder whether it would form part of our consideration.

We clearly as a committee have been doing some work on the consultation around the Welsh Government budget, and whilst this is not their formal submission necessarily, for our thinking on the Welsh Government budget I wonder whether we could include this as part of the consultation process. Is that appropriate?

It’s noted for the record, so we’ll be able to use that as part of that, yes, no problem at all.

Great, thank you.

Diolch yn fawr, Sam. Thanks. Great. In that case, we’ll note the papers. 

We’ll move on to the substantive item that we have this morning, which is the consideration of the first supplementary budget for 2025-26, and we’ve got the Cabinet Secretary with us. Do you want to introduce yourself and your colleagues for the record, please?

Earlier this month, the UK Government published its spending review, and you’ve said that this has resulted in a small amount of money for this financial year. But will it change your approach to reserves, borrowing and other tools that you have? So, what is the impact of the spending review on this particular supplementary budget?

There’s no impact at all on the supplementary budget, Chair, because the supplementary budget really just codifies decisions that were already made and preceded the comprehensive spending review. The small amount of money—the £4 million—I have just placed in reserves, that will not have any impact on our handling of the budget overall.

In terms of whether the CSR itself has an impact, then in the longer run, I think, particularly in the next Senedd term, the fact that we have a three-year revenue and a four-year capital horizon, and a promise of comprehensive spending reviews every two years, should mean that it will aid longer term thinking for the budget. It doesn’t have an impact in the here and now.

You’ve talked in this committee before about the Welsh spending review that you’re conducting. It’s not an event; it happens continuously. Can you give us a flavour of where that now sits, and what’s happening within that, with the implications of the spending review that’s happened in Westminster?

Well, it’s a different sort of exercise to the comprehensive spending review in Westminster. It’s not the same sort of review. It is a review focused on the longer term challenges that will face budget making here in Wales. It’s focused on providing a spotlight on those underlying factors, such as demographic change, drivers of artificial intelligence and so on—the things that will shape budgets in the future. It has a particular focus, as we discussed yesterday on the floor of the Senedd, on cross-cutting issues, the issues that can only be solved with contributions from a variety of Cabinet colleagues. The state of play is that we've been focused so far on discussions within the Cabinet, and the next phase will be to involve voices from outside the Welsh Government particularly. There's no impact that you will see on this supplementary budget from all that work. And, really, I think, where the work will have its impact will be in decision making beyond this Senedd term. I want to make sure that any incoming Government has a body of work to draw on that has done that analytical work, has looked at some of the hard choices that are bound to be there, and are able to shape their longer term thinking by drawing on all of that.

And with the spending review, we've seen money coming—the £445 million for rail, the £118 million for coal-tip safety. Also, within that £445 million, you've got £48 million associated with the core Valleys lines. Those aspects will then form part of your budget for next year. What's the phasing for that? Is that all going to be in next year's budget, or will you be outlining that for the next three years? How are you going to deal with those and are you satisfied that they are sufficient for now?

Well, in relation to coal-tip safety, first of all, that is the sum of money we asked for in the comprehensive spending review. It's a three-year sum of money, and it is matched by money that the Welsh Government is providing, and it will mean £220 million altogether, over [correction: by the end of] that three-year period. And we are satisfied that that is the amount of money that the system can absorb, because financial resources are only one aspect of what has to be lined up in order to do that sometimes quite challenging and complicated work, given the nature of the topography that we are talking about. But we are confident that that amount of money will allow us to press ahead with a significant programme of work, focused on category D tips particularly, where the safety considerations are greatest, and also talking with my Cabinet colleagues about how that investment can also create new economic opportunities in those places. So, it is primarily safety from the Welsh Government's point of view, but it is also part of our ambitions to stimulate economic activity in those places.

Of the £455 million [correction: £445 million], only £48 million of it actually comes into the Welsh Government's budget, the rest of it is essentially money that Network Rail will be deciding upon. The £48 million is £12 million for each of four years. So, you will see that in next year's budget. Could we have used more? I think we could. So, we will continue to press the case for further investment in core Valleys lines enhancement. That's what this money is for. We already have money from the UK Government to enable us to carry out maintenance, operations and renewals, and that was in the previous budget. The £12 million annually that comes in this year's budget is for enhancements. There are a series of things that we would like to do in the core Valleys lines: reopening the Aberdare-Hirwaun link, for example. The £12 million won't allow us to do everything that we had hoped to do, but it will allow us to do some things that we couldn't do without the £12 million. 

And with the other, effectively, best part of £400 million that's going to Network Rail, as the Cabinet Secretary for finance, how involved are you? Obviously, it's going to be the Cabinet Secretary for Transport and North Wales that probably has more of an influence on that, but where's your role within that spending and trying to have those conversations as to what else, potentially, could the Welsh Government do to leverage some of that spending?

Well, I think that there are two ways in which the finance responsibilities bite in this area. The plans for how that money is used are agreed at the Wales rail board. So, that is where the Welsh Government and the UK Government and other partners sit together. They prioritise and my job then, working with the Cabinet Secretary for transport, is to make sure that those things are affordable within the resources that we will invest in that, because we also spend money in these areas. So, my job is to make sure that the plans that are agreed there can be afforded from the Welsh Government's perspective, so I have a role to play there.

And then, secondly, I have a role to play in continuing to make the case to the UK Government that, while £455 million [correction: £445 million] is a good start in this comprehensive spending review, it will need to be followed by further investments in subsequent comprehensive spending reviews. And part of my job through the Finance: Interministerial Standing Committee, and the other ways in which we have contact with our Treasury colleagues, will be to make sure that there is no sense that the job is done and that Wales is now all right. This is a down payment, we will need more, and it's part of my responsibilities to make sure that that case is heard.

We might touch on FISC later, because I know you're shooting off there later on this morning, so it will be interesting.

So, finally from me, before I move on to questions from Mike Hedges, and moving on to the first supplementary budget: you have £1.8 million in unallocated fiscal resource, following the allocations in the supplementary budget. Are you satisfied that this and the other tools at your disposal provide you with adequate finances to manage any in-year issues? 

Well, it's the other tools that are significant. The £1.8 million by itself is at the very margins of what we need. We have unfettered access to the Wales reserve for this financial year. That will be the main way in which we balance up the demands that will arise inevitably during the year. That is always matched for us against the profile of spend across the Welsh Government. We'll begin to see that a bit more clearly as the summer goes on. Having taken £40 million out of the revenue reserve in the first supplementary budget, we have a working figure of around £250 million revenue still in the Wales reserve. And I think that is adequate for us to be able to manage our way through this year.

Because, of course, once you've spent it, you have to find money to replace it, because you can only spend it once, can't you?

Reserve money is exactly that, Chair. It is one-off money, which is why you use it in the way we do, which is to respond to emerging issues, not underlying issues, that happen during the year.

Okay, thank you. I'll bring Mike Hedges in at that point. Thank you, Mike. Can we unmute Mike please?

I've unmuted myself. 

There we are. Thank you.

Diolch, Cadeirydd. My first question is: there’s additional non-fiscal resource of £188.2 million for depreciation and student loans, and if student loans were run by anybody but the Government, it'd be called a Ponzi. Can the Cabinet Secretary confirm that that doesn't actually have any effect on spending ability?

I can confirm that these changes don't affect the amount of revenue or capital available to us for spending purposes.

Thank you, because sometimes these things confuse people listening or watching outside of the Senedd.

Your financial transactions capital balance, following the supplementary budget, is negative by £13.7 million, and is labelled as over-allocated capital. Is this because of the end of year coming at the wrong time, or is that a conscious decision? 

It's more a conscious decision. Chair, there are decisions that are shaped by end-of-year considerations. We decided, as you know, not to over-programme traditional capital this year. Financial transactions capital is a bit different to that; it's a much smaller amount of money, and the over-programming is a very small amount—it's £13.7 million, from memory. And the reason for that is that financial transactions capital is more volatile than conventional capital, because not everybody wants to take money that has to be paid back, and financial transactions capital does have to be paid back. So, there are always a larger series of negotiations going on at any one time to find proper purposes for it. And history has shown to us that not all of those negotiations come to fruition. So, a modest amount of over-programming allows us to take account of the fact that not all of the purposes that we envisage at the start of the year will necessarily take up the full amount of financial transactions capital we were envisaging.

Also, you'll get money coming back, won't you, from previous financial transactions capital rules?

Its big advantage, as Mike Hedges says, is that it's recycled money, and I think the Development Bank of Wales has a very good record of being able to use the money that comes back in to go on investing in some of the housing schemes, for example, that it supports through FTs.

Thank you for that, Cabinet Secretary. The supplementary budget sets out errors corrected by HM Treasury and the associated adjustments to funding. While noting these are small amounts, how were these errors identified and how do they link to any wider issues, and are you confident all errors will be identified?

Well, Chair, that is the sort of question that makes me very glad that Sharon is here with me, because she has to deal with that very nitty-gritty end of budget management. I'll just offer one sentence and then ask Sharon to help a bit. My understanding is that these errors are sometimes identified by Welsh Government officials—you know, when we look through, we see anomalies in the figures and we go back to the Treasury with that—and sometimes the Treasury itself notices. So, I think there's been some correction because the Treasury discovered that population factors, in the way that the Home Office and the Department for Work and Pensions were working through their consequentials—and they're very small consequentials in those cases—there was something amiss with the population element in that calculation and they've put that right, and that's resulted in a small amount of extra money coming our way. But Sharon will have a better sense of how all of this is really negotiated at the end of the year.

Yes. Thank you, Cabinet Secretary. So, yes, these errors, they're all related. There are three errors that have been corrected in this budget, across resource departmental expenditure limits, capital departmental expenditure limits and non-fiscal transactions—small additions to RDEL and CDEL and an actual reduction in FT—but all related to the same error that, in this case, the UK, HM Treasury, identified to us, because it was based on data that they had received. So, it wasn't something that we could have identified from what we had; it was from information that they had received from UK departments. Once they'd identified it, they notified us of it, and it related to the comparability and population factors that had been applied when the budget was set back in October. So, they went back, revised that, advised us that they were reasonably small adjustments, and confirmed that they would be affected in the main estimates, which is why we see them now. Generally, I guess it's not a perfect system; there's a lot of data, there's human intervention in this. What we take, we work with the data that we have, we focus on the large numbers there to make sure, and in the main we're confident and comfortable that those allocations are correct. When we see these kinds of errors, they're usually fairly minor and we do take assurance that the Treasury will go back and revise them, so we do get the outcome of that.

One of the more major errors that we've been talking backwards and forwards here—errors, mistakes, corrections, whichever way you want to talk about it—is the East West Rail line and the comparability factor there. And when there is detriment—and that's a significant figure rather than a minor figure there—what challenge do you have to that? Or is it, as you said in the Chamber yesterday, a judge, jury and executioner says, 'Well, tough.' I'd imagine when there was a different Chief Secretary in London, you might have had that, but you're the same party now. Is there a better conversation to be had on, 'Well, this is really going to hamper us'?

Well, the conversations are better, but the disposition of the rule book is unchanged. So, yes, we have better conversations and we're able to make those points more to current occupants in the Treasury. But, in the end, the Treasury has the ability to interpret the rules in the way—. We say to them, 'We think you've interpreted them wrongly', but they can come back and say, 'No, we're confident that they've been correctly applied.' There's no recourse, there's no element of independence in that assessment, and the people who make the original assessment are asking themselves whether they got it right. They do sometimes agree that they didn't get it right, to be fair. It's not just an automatic—. Sometimes, we make points and they consider them, but I think that's a smaller end. The bigger picture is that people are marking their own homework.

As part of your meeting later on today, is that something that will be highlighted again, that there needs to be something—and we've reported on it from it our own investigation here in this committee, and you've seen that report making recommendations—? Are you any further in furthering that with your colleagues around that FISC table later on today?

We are further forward in that way, Chair. I ran out of time yesterday before I was able to say that I'd had a conversation with Scottish and Northern Irish colleagues earlier in the week. I'd raised the Barnett reform issue there. I don't detect a strong appetite amongst others for fundamental replacement of Barnett, but I think there is an appetite for improving the way the current system works by greater transparency, by a firmer rulebook, by an element of independence in arbitration where there are disputes between different parties to it. I think, on that agenda of making the current system a better system, there is common interest amongst the three devolved Governments, and I'm sure there'll be things said by all three of us on that score. Yesterday's debate was about going beyond just making Barnett better, to, as I say, a more fundamental replacement of Barnett. I don't detect an enormous appetite amongst other players to embark on that.

Okay. Thank you for that. Thank you for that clarification. Mike.

I'll carry on where you left off there. Have you any intention of doing calculations by putting into formula what Wales's needs are? Are you able to identify whether Wales is a net payer or a net recipient?

Well, we do those sorts of calculations, Chair, of course, as part of our own work into the workings of Barnett. There's no doubt at all that if you take net inflows and outflows out of Wales, Wales is a net recipient of the way the funding flows across the United Kingdom, because our needs are greater and because of the way, as Mike Hedges said yesterday in the Chamber, the United Kingdom operates as an engine for redistribution, and we are beneficiaries of that.

Okay. Thank you for that. The supplementary budget indicates the same level of borrowing, but a reduction in the costs of borrowing. Is that due to the reduction in interest rates that has happened under the current Westminster Government?

No, not in this budget, Chair. Those reductions in interest rates will certainly make a difference in any further borrowing in the current financial year, but the reduced costs of borrowing that you see in the supplementary budget are because we did not borrow the full £150 million that we had originally anticipated last year. At the time of the budget, we assumed that we would, so the costs associated with that were reflected in the budget. In the end, we borrowed less than £150 million and, therefore, the interest you have to pay is on a smaller sum and that reduced the cost of borrowing.

Okay. Thank you.

That is very interesting. I would say I'm more interested in answers that I don't expect than the ones that I do. So, interest rate changes last year had no effect.

That wasn't the driver for the reduction that you see in the supplementary budget. The main driver for it was the fact that, in our original budget, we anticipated borrowing £150 million, and in the end we borrowed £80 million and, therefore, there was £70 million less borrowing on which we had to make provision for repayment. That is the primary reason why borrowing costs are lower. 

Yes, and it's worth noting that the actual interest rate we paid on 2024-25 borrowing was higher than the interest rate that we assumed at the time of the final budget. Obviously, when setting budgets, you base the costs of borrowing on your forecast of what interest rates will be when you actually do the borrowing. It turned out that, in fact, in 2024-25, it was a little bit higher than we'd expected. They've come down a bit since then, but I think we borrowed at 5.1 per cent, roughly, and we assumed 4.8 per cent.

And is that fixed, then, for the term of that borrowing?

Yes.

Right, okay. Thank you.

Thank you very much.

Diolch, Mike. I'll come over to Sam now. Diolch, Sam.

Thanks, Chair. And, Cabinet Secretary, thanks for being with us this morning. I just want to pick up further, following the debate yesterday in particular, the points that I made around the restrictions that you have on both borrowing and reserves. I’m just wondering where the conversations are at with the UK Government on any possible changes to your current restrictions on borrowing and the use of reserves, or levels of reserves, I should say.

Well, we have unfettered access to the reserve, Chair, this year. So, that is one significant restriction removed for now. Normally, we can only draw down £125 million in revenue and £50 million in capital from the reserves, no matter whether the reserve is full or whether that’s all that’s in it. We can have more flexible access to our own money this year. What we’ve not made progress on, however, are the points that Sam Rowlands raised in the Chamber yesterday. We want to go beyond that; we want a permanent restatement of the amounts we’re able to borrow, the amounts we’re able to draw out annually, the amounts we’re able to borrow, to bring them at least into line with their real value when they were agreed with David Gauke when he was the Chief Secretary to the Treasury back in 2016-17. At the moment, in real terms, they're worth 30 per cent less than they were then, and the budget, of course, is billions of pounds larger than it was then. This will definitely be raised in the FISC this afternoon. All our colleagues have an interest in the manifesto commitment made by the incoming Government to address this to be delivered, and I will certainly be pressing for that to be done by the autumn budget.

I see that Mike wants to come in on this, so I'll just bring Mike in quickly.

Very briefly, the local authority prudential borrowing allowance should be given to the Welsh Government. As we all know, Woking council has a debt of £19,000 per person living in Woking. I don't see why small councils in England can borrow unfettered and the Welsh Government is fettered. Do you see any reason for it?

No. Of course, I agree with Mike Hedges on that, and prudential borrowing is one of the things that we will press for. But I am at the moment trying to navigate this in a two-stage way. The first stage is the one I just outlined: to get the figures we currently have put back to their real value. But we have a wider agenda than that, certainly in relation to borrowing, where a prudential borrowing regime for the Welsh Government would put us in the same place as local authorities, and while I'm arguing, in the first instance, for the amount of money we can draw down from the Wales reserve to be uprated back to its real value, what I'd really like to see is that we have continuously unfettered access to that reserve. It does not need to be micromanaged by the Treasury in that way. But it's a two-stage approach: let's get the obvious things over the line, and then we can go on talking with others about how that regime can be better constructed for the future.

Back to Sam.

Thanks, Chair. I don't necessarily want to go into a debate on prudential borrowing for the Welsh Government. Clearly, the big difference is councils' ability to, technically, have unlimited access to tax, whilst the tax-raising powers of Welsh Government are much more limited, and therefore, if I was the person lending to Welsh Government, it takes a significant amount more risk versus lending to local authorities. But that's not the debate here today.

Following up on this point about reserves, Cabinet Secretary, you said a few moments ago that the use of reserves—I can't read my own writing, I'll try my best—is about responding to emergencies, not underlying issues. You've chosen to use reserves to bolster the national insurance contribution shortfall, I think to the tune of £36 million. I would argue that the national insurance contribution shortfall is an underlying issue and not just an emerging risk. How do you expect to fund that shortfall in the future, rather than just a one-off use of reserves in this year?

That's an entirely fair point, Chair. It will be a question for me to resolve as part of the budget-making process for next year as to whether or not to baseline that £36 million and make it a permanent sum of money that public services can rely on. What I won't do is make the reserve an annual event, in which, year by year, you go back and try and fund that through reserves. That would not be sensible. There's a decision to be made as to whether or not this is money for one year only, to smooth the passage for our public services, or whether the Welsh Government should permanently, by baselining, provide that £36 million. That's a decision I will have to face in the budget making, not today. But I do agree with the point the Member is making that you can't use the reserves every year to deal with a recurring cost.

Just to build on that point, Cabinet Secretary, you will know that the actual shortfall is £72 million, half of which is being met through reserves. So, we're not just talking about a challenge of how you square off the £36 million use of reserves, but the broader £72 million every year. I guess that's part of the discussions and questions that you're working through at the moment. Do you have any indication as to how that will be managed in the future, that £72 million shortfall for public bodies in Wales?

Well, the way, Chair, that it ought to be resolved is by the UK Government providing the same level of support to Welsh, Scottish and Northern Irish public services as was provided to public services in England. Those costs are met in full in England. They should be met in full in Wales and the other devolved Governments. That's another point that we will return to this afternoon, because I've not given up on making that argument. So, that is very much my preferred route and the right route. If that route does not open up, then we will have to continue to weigh up with our colleagues in public services how we bridge the £72 million gap. This year, it's having to be done on a shared basis. The Welsh Government is covering half; half of it will have to be found by our colleagues in public services. What I'm doing today is acknowledging that that is an important conversation that will have to happen as part of the budget making, but it's not a conversation that I've resolved for today.

If I may, Sam? As part of that work, what work are you doing with colleagues in local government and other parts of the public sector to scope out the impact of this? I'm thinking more about the voluntary sector, in particular people who are commissioned to do work on behalf of the public sector. In some of the casework that I'm hearing, and my colleagues are hearing, people are losing jobs because of the pressure that this is putting on those, effectively, front-line services.

So, within the scope of the public services recognised by the Chancellor, the ONS definition, in Wales, those services have been funded at 86 per cent of the total amount. So, they are having to find between 14 per cent and 15 per cent themselves. And of course, in all the different contacts that my colleagues have with those public services, we will be tracking the impact of that. There will be some difficult decisions they will have to make. There will be things they were planning to do that they will not be able to do, because the money will have to be used for this purpose instead.

We're very aware of the fact that there are organisations outside the definition where we've not been able to provide direct help with that amount. These are organisations that have had other uplifts in their budgets, and we will continue, through all the various mechanisms we have—the third sector partnership council, the work that my colleague Jane Hutt does with them—to track the impact on them. I'm not going to say this morning at all that there won't be an impact; inevitably, there will be. We will do what we can, where we can, to help to mitigate and manage that, but the impact is inevitably going to be real.

Thank you. Sam.

Thank you, Chair. Just on the national insurance contributions, you very helpfully, Cabinet Secretary, shared a letter with the committee earlier this week, giving some more detail on how the additional money came through, through the consequentials on the national insurance. I'm just wondering, just for clarity, perhaps, for the record, if you just want to explain briefly how there's a difference between the money that's come in from UK Government departments versus the reallocation out from Welsh Government departments. I would understand that to be for a few reasons, of course: it's unhypothetacted in the first instance, but, secondly, Government departments between the UK and Wales don't necessarily align perfectly. An example I've got is the money coming in as a consequence relating to transport is £1.8 million in revenue, and the money going out to the transport main expenditure group that you have is £4.3 million. There's quite a significant difference. I wonder, for the record, if you could just briefly explain why that's the case.

Of course. Thank you, Chair. Well, the fundamental reason is the one that Sam Rowlands pointed to. Money comes unhypothecated to the Welsh Government, and it's for the Welsh Government to decide how the money is spent. So, when the consequentials for national insurance came to the Welsh Government, I had already made a commitment that we would just be a post box for that purpose. The money unusually would not be there on the table for the Cabinet to decide how it would be used; it would be used for national insurance purposes. But I didn't simply wish to slavishly follow the percentages that were used for Whitehall departments. What I decided was that we would share the money equally across everybody. So, we've given everybody the same percentage uplift in the amount of money they have through the money that we have been able to provide. That's how everybody gets 85 per cent, 86 per cent of these costs covered, rather than saying, 'Well, I'll give this part of the public service 95 per cent and that part of the public service 75 per cent,' which was an option. You could have done that. But I felt that the most straightforward and the fairest way was to cover the same percentage for every part of the Welsh public service. Andrew.

I think the transport one is a good illustration of the mismatch between how the value of the consequentials was generated and the costs to the Welsh public service of the national insurance contributions. The consequential on the transport side is relatively low compared to the cost on the transport side in Wales, because Transport for Wales is a public body in Wales, whereas not all the train operating companies in England are public sector bodies. That's the way in which public services are organised in Wales. It's different from the way it is in England. That means, because of the method the Treasury has used, the amount of funding that we get is based on how the public sector is organised in England, rather than how the public sector is organised and the size of it in Wales. The two things don't match up at all. So, the consequentials we get are based on the size and organisation of the public sector in England, and then the costs are based on the size and the organisation of the public sector in Wales.

If I may, Sam—I might be stealing your thunder here, but it might be where you were going with it. If you're using that methodology and equally spreading it across the public sector in Wales through the different MEGs, with different departments you have different numbers of people working in them, which is effectively the driver for this money. Are you confident that that was fair, or did you make any variations for some departments with a lot more head count, if you like, than others? Or is it because, for most departments, the main spending in those departments is on people, and therefore it matches pretty accurately? Or were there any discrepancies? Were you saying, 'Well you're going to get enough to cover all the NI cover, but'—? Do you get what I’m—? Just to clarify that for me.

Sure. The amounts of funding that have been allocated are based on information provided by departments about the actual costs of the public sector employees within their areas of responsibility. So, I think we're pretty confident that we've given roughly 85 per cent of those costs to everybody and there hasn't been that kind of—

So, there weren’t many with big variations from the actual to that 85 per cent of what they received.

Basically, the way this worked was that the NHS, local government and other employers told us how much the national insurance contribution increase would cost them, and we've been able to provide, with the UK Government funding plus the amount allocated from our reserves, 85 per cent of that cost across the board.

Okay. 

So, had we just offered everybody the same cash amount then it would obviously have had that distorting effect, but the decision to offer a percentage uplift means that the number of staff you have doesn't matter: you get 85 per cent of what you need.

What I'm driving at is that it's as fair as it could be, and you've tried to be as fair as you can.

I believe it's fair in that way. There are other ways of describing fairness. You could say some public services matter to the public more than others, and that you should have therefore covered a greater percentage of their costs, and other parts of the public service would have had to find more. You could have said the fairest way is to declare your priorities and fund accordingly. But I felt that the fairest way in this instance was to cover the same percentage of the bill for each of our public services.

But it was a Treasury decision that put you in that invidious position of having to do that. 

Oh, yes. Indeed, yes. 

Thanks, Sam. 

Just a brief final question from me, Chair, and it's fairly general, I suppose, Cabinet Secretary. I just wondered, on this general issue of this shortfall that you've had to manage, unfortunately, and dealing with it in the future—I appreciate you'll have another go today in your meeting later on—I was wondering, on a scale of 'not worried at all' to 'very worried', where you're at with how this may pan out in the future and the impact on public services in Wales.

Well, I'll probably put it somewhere in the middle of that spectrum, because we have been able to find money to help. The result is that our public services have a challenging but not extraordinarily large sum of money that they all have to find. So, I wish it wasn't like this. I wish the rulebook, as I see it, had been followed and the money had come in full. The size of the gap is significant, but I think we found a way to manage it.

Thanks.

Thank you, Sam. I'll come to Buffy now, if you could unmute Buffy for us, please. Diolch. There we are.

Thank you, Chair. Good morning, Cabinet Secretary. Back in March, you told us the health service would need to demonstrate that funding had delivered the outcomes it said it would in order for you to have confidence to allocate funding this year and avoid

'a different level of scrutiny on any proposals'.

You've allocated an extra £100 million for this purpose in this supplementary budget. What processes and scrutiny have you undertaken to determine this latest funding allocation to reduce waiting times?

I thank Buffy Williams for that question, Chair. I would have had a series of meetings with the health Secretary. Officials would have had further rounds of discussions to give me confidence that the plans that were coming forward were plans that could be realised in practice. Part of the confidence was that we'd already provided £50 million earlier in the year, and we were able to see what that £50 million had done, and there was some confidence that, the plans that health boards had submitted for that £50 million, they had delivered on what they said they would do. But it was a detailed process, line by line, looking at what health boards said they would deliver for the money that we were being asked to provide, and a lot of testing of that, a lot of challenge of that, and a detailed schedule, health board by health board, of what the money is intended to deliver for patients, and, because I felt there was genuine rigour in the process, we were able to come to an agreement on that sum of £100 million.

Thank you, Cabinet Secretary. Following on from that, given the Cabinet Secretary for Health and Social Care's disappointment at the increase in long waits in April, how are you assuring yourself that this £100 million allocation will deliver the outcomes the Welsh Government is aiming for?

The primary responsibility, of course, lies with the Cabinet Secretary, and I know that he has a weekly handle on the levels of activity that are promised against the money and then the actual delivery against those schedules. There are then challenge meetings, as you might call them, led by Julie James in her Minister for Delivery capacity, and I join her for that, particularly with the health portfolio. Julie has challenge meetings across the Government to make sure that the Government's programme is on track, but, particularly when she is holding those sessions with the Cabinet Secretary for health, I get invited in order for me to continue to have confidence that the money we are providing is turning into the activity that was promised.

Okay, thank you. The explanatory note accompanying the supplementary budget contains no information on the allocation, saying that further information
will be provided later this week. The Cabinet Secretary for Health and Social Care made an announcement about the funding a couple of days after the publication of the supplementary budget. Why have you decided this is the most appropriate way of presenting this information? Is it transparent? 

Thank you for the question. It was a dilemma. We'd fixed the date of the supplementary budget. Jeremy separately had things he needed to line up to make his announcement on how the money was to be used. The choice for me was: did I put the money in the first supplementary budget without being able to explain exactly what the money is used for, which is what our normal practice would be? But I did know that this budget was being laid on a Tuesday and he was making the announcement on a Thursday. I myself, rightly or wrongly, came to the conclusion that that would be a sufficiently narrow gap for the Finance Committee to be able to interrogate that. The alternative was to have not put the £100 million in the first supplementary budget, and to have put it in the second supplementary budget. I felt it was better for transparency reasons, given the decision had been made, to reflect it in this first supplementary budget, and to live with that 48-hour gap between declaring the money and being able to explain fully the purposes to which that money would be put. I recognise that it isn't the normal way of doing things, that it was a bit of a dilemma, but, if I had to live with one of them, I'd rather have told you about the money early on in the year, rather than it waiting to be regularised until quite a bit later.

Would it have been an option for Jeremy to make the announcement straight after you in Plenary to Parliament, rather than to make it outside of a Plenary session? 

Yes, of course, it was an option. In the end, timings don't always work out in the way that you'd hoped, and there are other conversations that had to be had, and final details that are still being confirmed and regularised and so on. We couldn't make the gap any narrower than the 48 hours we ended up with.

Okay. Thank you. Buffy. Diolch.

Thank you. You've moved over £70 million of capital within the housing and local government MEG. Can you provide some background for this, and does it mean any change in policy or deliverables?

No change either in—. No change in policy, Chair; some change in deliverables. So, this is money that was originally allocated for the building safety programme, a programme that was part of the co-operation agreement. In the end, that budget line was not spent to the extent that we had provided for and the money therefore became available for other purposes. That money for building safety will have to be reprovided in future years because there's no diminution in the Government's commitment to providing the necessary money for building safety. But, given that building safety couldn't absorb the money that had been allocated to it, the Cabinet Secretary for housing made her case for using that money for other housing purposes. So, the bulk of that money has gone into the transitional accommodation capital programme, which has been a big success of this Senedd term, where our local authorities and housing association colleagues have been able to use money to bring units into use more rapidly, more imaginatively, than the full new build programmes. So, that's where the deliverables issue comes in. There will be more units now created through that transitional accommodation capital programme for people who are on housing waiting lists or who are homeless, and the money for the building safety programme will have to be reprovided in future years.

Thank you for that answer. My last question: the supplementary budget includes a £15 million allocation for the Anglesey and Celtic free ports, with funding transferred from the Ministry of Housing, Communities and Local Government. You've previously told us that pursuing a conclusion on free ports was one of your short-term priorities. Can you provide an update, please, about this, and what work needs to be done to conclude relevant matters?

Thank you for that question, which is a very contemporary question. We discussed a bit of this yesterday as well. So, there are two things that need to happen in both free ports in order to make use of the money that is available. First of all, we have to conclude the sign-off of the full business case. Now, the good news in the comprehensive spending review is that the full business case for the Celtic Freeport is now signed off. We're in the very final stages of doing the same thing for the Anglesey Freeport, but we're still waiting for the UK Government to give its final approval to that. Once the full business cases are signed off, then we have to sign memorandums of understanding between the Welsh Government and the UK Government in both of those free-port contexts, and, at that point, the money can be put to use. What we've done in the meantime is to make sure that the plans are all there, so, as soon as those MOUs are signed, the money can be put to work. So, there's £5 million being set aside in the Anglesey context for the Prosperity Parc grid connection to Parc Cybi; there is £5 million identified in Port Talbot for the refurbishment and remediation of Talbot wharf; and there's £8 million set aside for work in Milford Haven—construction of a new water access pontoon and so on. So, the point I'm trying to make, Buffy, is that we haven't waited until everything was signed and sealed to get on with the planning. The planning is well advanced. The £15 million will allow us now to get on and make those things happen.

Thank you.

Thank you, Buffy. I think Mike wants to come in on this. Hang on a second, Mike. There you are. Go for it.

Thank you. Is this money outside Barnett or inside Barnett? Isn't it like the city deals, with additional money provided outside of Barnett?

It's outside Barnett.

Okay. Thank you very much. Great, just bringing us nearly to time, with you going to the Finance: Interministerial Standing Committee this afternoon, can you give us a flavour of what's going to be on the agenda? We've talked a little bit about your priorities, really, for those discussions, and, obviously, you'll write to us with an update once you've been, but what's in the forefront of your mind going into that meeting today?

In a full FISC, Chair, there are two sorts of meetings that happen. There is the plenary meeting, and then there are a series of bilaterals that go on. So, I have slightly different things to talk about in the two different contexts. In the plenary part, there will undoubtedly be a reflection on the comprehensive spending review, and some of the things we talked about today will come up there. There will definitely be discussions of financial flexibilities, and a paper that the devolved Governments will have been working on to make our case for greater financial flexibilities in the management of our own affairs. I anticipate that the United Kingdom Internal Market Act 2020 may be raised in the full FISC.

By and large, I tend not to raise Welsh-specific issues in the wider meeting; some of my colleagues, I think, may do. The Scottish Government budget, for example, has been more badly affected than we have because of comparabilities that they have with the Department for Work and Pensions budget. So, I anticipate that there may be some points made from a more specific context than I am likely to make. I will make the points that are most relevant to Wales only in the bilateral meeting that I will have. There are matters there, some of them very, very specific, to do with some accountancy treatment issues in relation to the Development Bank of Wales, for example. I will be talking about coal tip safety and the need to make sure that this was the first part of a longer programme. I will undoubtedly be wanting to talk about rail and how we can be sure that we have the influence we need on the decisions that will be made by Network Rail and so on. So, the bilaterals follow the full FISC, and that's where the Welsh-specific things—

And that will be with the Chief Secretary or with the Chancellor?

These are always with the Chief Secretary.

The Chief Secretary, yes. Well, thank you very much, and a safe journey to you to London.

Diolch yn fawr.

Diolch yn fawr iawn.

Under Standing Order 17.42(ix), I resolve to exclude the public from the remainder of this meeting. Is everybody content? I can see nods. So, yes, we'll go into private. Diolch.