Reviewing the Fiscal Framework

1. Questions to the Cabinet Secretary for Finance, Constitution and Cabinet Office – in the Senedd at on 15 May 2024.

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Photo of Mark Drakeford Mark Drakeford Labour

(Translated)

2. Will the Cabinet Secretary provide an update on progress in reviewing the fiscal framework of Wales? OQ61092

Photo of Rebecca Evans Rebecca Evans Labour 1:35, 15 May 2024

Yes. The fiscal framework is subject to regular internal review. In the main, it is operating well. However, there are elements relating to fiscal flexibilities where I have been making the case for improvements with UK Government Ministers.

Photo of Mark Drakeford Mark Drakeford Labour

I thank the Cabinet Secretary for that, Llywydd. By the end of this Senedd term, it will be nearly 10 years since the fiscal framework was first negotiated, yet the figures in it, as we have heard, remain stuck at the level that they were agreed back then. In the meantime, budgets have risen, inflation has eroded the real value of those figures. In the meantime, as well, agreement has been reached in both Scotland and Northern Ireland to have greater flexibilities in managing what is, after all, money that belongs to this Senedd. Does the Cabinet Secretary see any prospect of putting this right for Wales in the dying months of the current UK Government, or must we wait for the election of a different administration in London to treat Wales fairly and sensibly, so that public money can be managed here in the most effective way and in ways already available to every other part of the United Kingdom?

Photo of Rebecca Evans Rebecca Evans Labour 1:36, 15 May 2024

Yes, it's absolutely the case that the value of the flexibilities that we have has been eroded since the point at which they were set. So, in this financial year, our reserve capacity and also our borrowing powers will be worth 23 per cent less than at the time they were originally agreed. So, we absolutely think there is a very strong case for the powers and the flexibilities that have been given to Scotland recently to be given to us in terms of the indexation of the borrowing and the reserve. I will absolutely continue to make that case at the Finance: Interministerial Standing Committee. I'm very pleased to tell colleagues that I do still have the support of my counterparts in Scotland, and also now in Northern Ireland, for these measures. Despite the fact that they have had improvements, they're still very keen to support us in making the case, because they know it makes sense for all parts of the United Kingdom in terms of the devolved Governments.

Photo of Janet Finch-Saunders Janet Finch-Saunders Conservative 1:37, 15 May 2024

I again find it rather amusing that, as the ex-First Minister, you are asking questions that are drawing attention to your own fiscal chaos, and yet it was never raised during your own tenure. These have not just sprung up now since you—[Interruption.] According to the Office for National Statistics, the figure in 2022 for the Welsh deficit between public spending and revenue was estimated to be an eye-watering £20.3 billion. Wales has the highest net fiscal balance per head in Great Britain, with a staggering £6,500 per person. For comparison, where do we think England comes in that chart? Roughly the same? Half? No. It was six times lower, at £1,100 per person—a country that has faced the same challenges as Wales, yet clearly is far better at balancing their public finances. I wonder what the difference is. Councils across Wales are facing more than £5 billion of debt. Why is it always Labour Governments that make a mockery of taxpayers' money and public finances? Will the Cabinet Secretary agree with me that the Welsh Government's own frivolous spending has wrecked the fiscal framework of Wales, and that, clearly, the socialist economic strategy of tax and spend is not only exacerbating the problem, but is drowning the Welsh dragon entirely? Diolch.

Photo of Rebecca Evans Rebecca Evans Labour 1:38, 15 May 2024

I'm afraid I don't recognise any part of that contribution at all because it mixes up a whole load of different matters, including the way in which the UK Government is responsible for pensions here in Wales, the way in which the UK Government is responsible for benefits here in Wales. Colleagues will know, of course, that we have a generally much older population here in Wales than other parts of the United Kingdom, and that is reflected through then in terms of the amount of money that is spent on people here in Wales. I think the important point to recognise, though, about the fiscal framework is that, thanks to the agreement made by the former First Minister, and finance Minister, as he was at that point, as well as providing the additional policy tools—and we've had a debate about how those need to be improved—the devolved taxes negotiated by Mark Drakeford have so far made a positive net contribution to the Welsh Government budget. Over the years for which outturn is available, this amounts to over £400 million in total, which we've been able to invest in public services here in Wales. And the Barnett needs factor, which, again, was introduced by part of the fiscal framework agreement, led by Mark Drakeford, has also provided additional funding, and is contributing around an extra £300 million to the Welsh Government settlement in 2024-25. So, there are certainly areas of the fiscal framework that are working for us; it is, really, that matter of the fiscal flexibilities that we need to see updated.

Photo of Adam Price Adam Price Plaid Cymru 1:40, 15 May 2024

The former First Minister has made the case very eloquently in favour of a review. Now, the automatic mechanism for a review under the agreement—the periodic review—is some years off. But the agreement does have within it the ability, the power, for the Welsh Government to ask for a review now. So, have you asked for a review, or will you, given what we've heard?

Photo of Rebecca Evans Rebecca Evans Labour 1:41, 15 May 2024

So, I've just set out the ways in which the fiscal framework is working very much to our advantage at the moment, and particularly in terms of the Barnett needs factor, whereby we have an additional £300 million in the settlement. So, I think that's important to recognise. There are things that absolutely aren't working for us, but let's remember that we're dealing, at the moment, with a UK Government that sees everything as a zero-sum game—everything as a negotiation where they have to take something from that table as well. This isn't a UK Government that is interested in working with the Welsh Government for the benefit of the people of Wales. So, when you look at the way in which the Scottish framework was reviewed, certainly, the Scots gained a number of things, but then they also had to put on the table a number of things to lose. Their framework is different to ours. Now, if the UK Government wants us to put anything on the table, all we really have to put on the table in those negotiations is the Barnett needs factor, and we've heard time and time again from the benches over there how the Conservatives think that we're overfunded in Wales. So, I don't think that this is the right Government to go into those negotiations with. However, there could be a case for a future review with a Government that is more disposed to devolution and one that respects this Government and this Senedd.